The eurozone is set for an inevitable break-up in spite of appearances that the crisis in the region has abated, the co-chief executive and co-founder of Danish trading firm Saxo Bank has warned.
“The European Union is just a big mess, and it’s quite clear what you would have to do to get Europe back on a growth track: you would have to dissemble the euro and go back to a number of currencies in the area. It will only get worse and eventually it will dissolve, I’m absolutely sure – either by planning or by the markets taking the whole thing apart,” said Lars Seier Christensen, speaking at an event hosted by Saxo Bank in London on Wednesday.
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| Lars Seier Christensen, Saxo Bank |
A long-time critic of European politics, Seier Christensen said he would like the EU to get back to its original goals, such as free trade and a larger market for selling of goods and services, but said in its current form, the bloc appears to have little appetite to move in that direction. “It’s a massive bureaucracy and, in my view, something that is bordering on a totalitarian model. It’s just a constant rolling-out of more and more intrusive treaties and nobody really gets asked [for their opinion]. A banking union could be disastrous for countries that go into it with healthy banking systems,” he said.
His views were shared by economists and commentators who spoke at the event. “The EU has shown an absolutely incredible ability just to keep ambling on in an apparently robust fashion – it doesn’t really seem to be the sign of a fragile institutional framework, even if it is indeed a failing institutional framework,” said Mark Littlewood, director general of the Institute of Economic Affairs, a UK-based think-tank.
The European Central Bank (ECB) is in a particularly tight corner as it looks to tackle concerns over inflation, said George Magnus, an independent consultant and formerly senior economic adviser at UBS. Quantitative easing (QE) could turn out to be the only viable option, he said.
“If we do have deflation risk in Europe, the ECB clearly should do QE, but it feeds our obsession with what monetary policy and central banks can do to solve problems that are really about private-sector debt. In a way I think QE lets Europe off the hook in terms of trying to fix deep-seated structural problems that beset us. It’s not the territory of the central bank. I think they should do it if there’s no other game in town, but I don’t like it,” said Magnus.
But others warned that the difficulty of implementing QE would be to source a sufficient quantity of suitable assets for the central bank to buy – a challenge that has been cited previously by ECB president Mario Draghi.
“All of the tools at their disposal have problems, either in the potential efficacy or in their construction. Draghi makes the point that this is an area dominated by bank credit rather than bond issuance as in the States, so the solution would certainly have to be different,” said Nick Beecroft, senior market analyst at Saxo Bank.
The event was held to coincide with the recent launch of Saxo Bank’s new social trading site, TradingFloor.com, a portal where private traders can create their own profiles and opt to reveal their trading strategies for others to follow. The bank believes the launch of the site marks a new era when financial markets and information are becoming far more open and accessible. “The future of trading will be defined not only by financial dynamics and disruptions in technology, but also by international networks developing and connecting cultures all over different continents. Innovations in trading are emerging as real enablers, and performance and trading are more accessible to many rather than being the preserve of the few. Technology is empowering a new generation of traders and in doing so it is revolutionising the behaviour of those traders,” said Seier Christensen.
Saxo also announced yesterday that it had launched stock options trading for retail and institutional investors on its platform in response to growing demand for the product. It will initially provide direct access to the 200 most liquid stock options across the US, Europe and Asia Pacific.
“Clients that already trade with Saxo but currently trade those options elsewhere – and we know there are a lot of them – will benefit from being able to now consolidate that part of their trading into one platform, taking full advantage of our cross-product margining and our trading environment in the future,” said Seier Christensen.