Mark Mobius: Europe Will Emerge From Crisis Stronger Than Ever

Tuesday, 19 Jun 2012 07:20 AM

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Europe will not only survive its debt crisis but will also emerge on the other side of it stronger than ever, says global investor Mark Mobius, executive chairman of Templeton Emerging Markets Group.

Calls for a eurozone breakup continue to grow on fears Greek debt burdens are too high for the country to stay in the eurozone, making abandoning the currency and default a likely exit.

Meanwhile in Spain, yields in government debt auctions have spiked above 7 percent on fears the country may need a bailout, as like Greece, investors worry the country suffers from too much debt and not enough growth.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Policymakers will work it out, Mobius says, adding eurozone members will forge a more cohesive fiscal union in two years to better manage taxing and spending and come out stronger down the road.

“This will go on, back and forth for a long time. They have to agree on fiscal responsibility and adhere to certain principles they have not had to do before. It's a big change but I think they will make these reforms and Europe will emerge much stronger than ever before,” Mobius says, according to CNBC.

While eurozone countries share a common currency and one central bank, they have largely been able to tax and spend at will on their own.

Meanwhile, fearful investors who hide out in safe havens for too long miss out on rallies.

It's happened elsewhere in the past and will happen again.

"During the subprime crisis everyone was in a panic, everybody got out of all markets and rushed into U.S. Treasurys. They learnt a bitter lesson because within 12 months, (many) markets were up 60, 70, 80, 90 to 100 percent," Mobius says.

Europe breathed a sigh of relief recently when Greeks voted in a market-friendly fashion over weekend parliamentary elections, pushing the conservative New Democracy into power and likely giving its left-of-center ally, PASOK, enough votes to form a coalition government in favor of sticking with the euro.

Still, other experts note that the elections put off default and exit from the eurozone for now, pointing out that five years of recession, high debts, poor economic competitiveness and weariness over austerity measures attached to past bailout funding will make sovereign default an ongoing threat.

"The crisis is far from over," Commerzbank analyst Christoph Weil writes in a note to investors, the Associated Press reports.

"A sovereign default by Greece and the country's exit from the monetary union have probably been avoided for the time being. "

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.



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