Tuesday, October 23, 2012

Tweets from HBS Reunion Session on the European Debt Crisis

October, 2012
Tweets from session on European Debt Crisis Panel

@hbsreunion for @tmania attending panel on the european debt crisis w/ professor Rajiv, Dante Rossini, Luis Viceira, George Papaconstantinou

Viceira is optimistic about the Euro but question is who will be part of the Euro other than Germany and the Netherlands. 

Are you optimistic? Roscini says yes because Europe has no choice. The only institution that moves at market speed is the ECB.

Not sure that Spain, Italy will be successful in restructuring, but if global Growth happens, might see a friendly divorce in 5 yrs

Fmr greece finance minister says that this crisis was inevitable. Initially everything was ad hoc, but we have gone a long way in 3 yrs

There will be no such thing as an orderly exit from the euro.

Greece had a fiscal crisis. Ireland had a banking crisis. What's happened in greece is equivalent of us reducing debt by $1T!

Origins of crisis same as US. Lending bubble. Same thing in Spain, Ireland. in US, with Fed, very quick response.

Spain has no Fed, so it is like Japan. Very slow de-levering.

Original Euro structure was wrong, designed to placate Germany. Markets under-priced risk. 

Private debt in Italy is small. Duration of debt in Italy is longer than most.

What tools do you have to deal with the crisis? ECB has evolved and Much more like the Fed in last three years. 

ECB is like the Fed was in 1920's. ECB was originally part of the Bundesbank.

ECB has bought time? Has it made system more risky? He hasn't done quantitative easing- hasn't bought securities from banks like the Fed has

Who do you respect most or least? Fmr finance minister responds, "I am a politician." LOL He won't talk about Greek politicians. 

In northern Europe, loudest voices talk about lazy south. But northern Europe has benefited most... #hbsreunion

Financial vs non financial businesses... Banking system is in shambles. Businesses can't get funding in Spain, Italy or France.

There's a lot of uncertainty and we are seeing social and political breakdown in these countries. There has to be resolution of uncertainty.

Hedge funds are actively engaging. If you bought government bonds in Europe, you made good money in last few months.

Not a question of choosing companies in the EU but of figuring out if you want to invest there at all.

Asset prices are much more reasonable. Great time to invest in Europe. No access to capital. But you have to believe

If you're slightly positive, great time for PE to invest in EU.

There's nothing woes than a middle class used to rising incomes and borrowing against future earnings and experiencing what happened

Did you ever fear for your safety? (asked to former Greek finance minister) Yes. #hbsreunion #obvious

Greek finance minister disagrees. Bigger issue hasn't been addressed. We haven't learned lessons of crisis and looked at regulatory issues.

Hiring and firing? How does that affect the future? If that's not successful, Italy, Spain and Greece won't be in the euro.

Limit on Hiring and firing rules - under 45 employees. So you see a lot of cos with less than 45 employees and then nothing until over 1000!

How can these countries find growth? Reforms aren't enough. What are their competitive advantages?

Is CA the next Greece? These guys aren't Experts in that says @tmania he's right.

France may be a nice short. They haven't been swept away by the #crisis If they lose their AAA rating, bad news.

CA has industries that are robust unlike Greece. Also CA has the federal government.

European economists say $ won't go on forever and gold will come back.

Can anyone explain the resiliency of the euro? It has been amazing. 1.25-1.3 vs dollar throughout the crisis.

The market isn't pricing the breakup of the euro. Controversy on panel ensues.

Probability of Germany leaving euro? The Europeans will do anything to keep it together says Roscini.

How long  can US sustain reserve currency status? We may be reading too much into how quickly his happens. [hope so] #hbsreunion #scary

Property values in UK at all Time high. Wealthy Spaniards and Italians are not buying in their countries but outside of the EU.

A number of individuals and companies are scrambling to get their money out of the EU. Deposits in Spanish banks are down over 30%.

Great book title: "How Greece saved the Euro". Why? Because Greece first showed the weakness of the Euro.

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