A wasted crisis
A slightly different view is, however, espoused by Valentijn van Nieuwenhuijzen, head of multi asset at NN Investment Partners. He too remains overweight Europe, because the firm continues to favour those markets that are driven by accelerating earnings and loose monetary policy.
But, he adds: “as a result of Greece, we changed from a medium to a small overweight.
Unlike Carney, however, van Nieuwenhuijzen concludes that a massive opportunity has been wasted by Europe to put both Greece and the whole region on a more robust and stronger growth path in the aftermath of crisis.
He argues that while the lessons from the crisis could have been used to guide the construction of a more robust physical, financial and institutional infrastructure, while at the same time cushioning the short-term growth “costs” of such structural reforms by easy and flexible monetary and fiscal policy stances, this has not taken place.
“Obviously, the latter would only have been possible if there had been agreement on credible commitment to the reforms, but if there was ever a time to find justification for this trade-off between reform and short-term growth support it was during the Euro crisis. By now it seems we have indeed wasted a good crisis and lingering growth weakness and recurring political crisis will be with us for some years to come.”
It is true that the structures in place now are more robust than they were in 2012, balance sheets are stronger in many parts too, but there is no denying that allowing the crisis in Greece to get to this level is a failure on all parts. And, while the risks of contagion are lower than the previous times, it is clear that markets have taken some of their risk off the table because, as Carney pointed out, in the current, twisting, fluid situation, there is no room for complacency.
