Europe News

2011 Is Not 2008: Analyst

The wild oscillations in the market seen this week have prompted fears amongst investors that this is 2008 all over again, but one analyst told CNBC this isn't a repeat because today's macro economic environment is very different.

"The biggest difference this time around is that the fiscal leeway and room to manoeuvre for some of the government's has disappeared and that may be why the markets are putting so much pressure on some of these governments.

What's worrying markets is that looking at these government debt levels there is no way that these governments can bail out their financial sectors yet again in 2011," Christian Gattiker-Ericsson, chief strategist and head of research at Bank Julius Baer told CNBC Friday.

He added that the response by the governments of Spain, Belgium, France and Italy to implement a 15-day short selling ban was the wrong thing to address the markets.

"My initial reaction was do we have to repeat all the mistakes of 2008 again? A short selling ban is completely useless and counter productive overall.

If you look at the price performance of US financials in the aftermath of a short-selling ban you had minus 50 percent over the next twelve months," he added.

He said that a long term solution to the root causes of market volatility was needed by governments and central banks rather than a short term fix by the regulators.

"What's really needed right now is a global type solution, really concerted action on a global scale. Markets are not prepared to wait for the Jackson Hole meeting (the US Federal Reserve's annual meeting to be held later this month) something needs to happen at best this weekend.

"The G7 and the central banks in particular have to come up with something. This has been a currency war this summer with everyone trying to devalue their currency and this has led to a complete mess in financial markets this summer," he said.