Business Leaders See Euro Zone Break-Up

An overwhelming majority of business and financial leaders from around the world think there is a chance that one or more euro zone countries will leave monetary union over the next three years.

Euro bills
Euro bills

More than four out of five senior executives, or 85 percent, said there was a chance of this happening, while two in three, or 60 percent, said there was a chance the euro zone would break-up over the next three years.

The survey of 461 senior executives from leading companies, investment banks, hedge funds and sovereign wealth funds in Europe, the US and Asia highlights the grave concerns over the future of the euro zone, as policymakers consider reforms to tackle the problems of the indebted countries on the currency club’s periphery.

The poll, commissioned by RBC Capital markets and conducted by the Economist Intelligence Unit, singled out rising concerns over the build up of public debt in Europe and the US.

More than four in 10 executives, or 46 percent, said their own country’s external debt was growing at an unsustainable level. More than 60 percent of US and UK executives said this was true about their own government’s debt.

Executives from the euro zone’s peripheral nations of Greece, Ireland, Portugal and Spain fear indebtedness will hold back growth and could put pressure on the future of the euro zone as Germany, Europe’s strongest economy, recovers more quickly, creating a dilemma for policymakers over whether to hold or raise interest rates in the coming months.

“The debt that hangs over individual countries is casting a long shadow in the minds of corporate executives and investors,” said Marc Harris, co-head, Global Research, RBC Capital Markets.

“The results of the study are a clear call to action by the world’s business leaders.”

Even in countries that are less severely affected by sovereign debt problems, almost all executives believe that governments will have some problems financing themselves, particularly when the scale of debt that is maturing over the next year is taken into account.