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Change In Government Could Hurt Recovery

Political uncertainty in Europe is pretty troubling, says Nathan Sheets, global head of international Economics at Citigroup. In the keynote presentation at the ’Financing & Investing Conference,’ he said if they can maintain the current political environment, they might get through their financial challenges. However, changes in government could result in policy changes which could hurt any recovery. Europe faces both acute and chronic challenges. The acute challenges are the financial and stability risks that could erupt into crisis. However, recent policy actions have been helpful in dealing with these. The chronic challenges are the deep problems that, if left unaddressed, could lead to disruptions over time. These include growth and competitiveness imbalances, fiscal imbalances and debt sustainability, bank capitalization, and the lack of an apparatus to make decisions. The bank capitalization is also particularly worrisome, he said, as since they are undercapitalized, they have reduced lending. In fact, lending is contracting at a pace similar to what was happening during the financial crisis in the U.S. This is drawing the lifeblood out of the European economy as it is more dependent on credit than in U.S. As a result, it is hard to put together a scenario where Europe grows, he said. The conference is sponsored by FEI, the Canadian Institute of Chartered Business Evaluators, CVCA, and the CFA Society Toronto. Theme of the event was ‘Fishing for Financing: Finding Opportunities in Private Markets.’

Courtesy of Benefits and Pensions Monitor website News Alerts

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