Constance Hunter, chief economist of Aladdin Capital Management, says that Europe could recover more quickly if a cathartic event forced policy makers to make tough decisions sooner than later.
Without a jolt to the system, she adds, current fiscal and monetary policies risk prolonging Europes economic woes. She gave her assessment in a conversation with FINforumss Chairman John Seigenthaler.
In her discussion with Seigenthaler, Hunter identified three events that could force dramatic change. Potentially most impactful would be bank failures, as the European Central Bank has no mechanism similar to that of the US for taking over failed financial institutions. The second event could be delivered via a German electorate that votes for politicians who opposed aiding the European Unions economically beleaguered countries.
The reality is that decisions may not be made in the European Commissions offices in Brussels but on the streets of Munich and Bonn, Hunter said.
The third event could occur if European Central Bank members take a more hawkish approach and decline to extend credit by purchasing country bonds.
The paradox is that Europe needs growth at a time when it is imposing austerity measures that are hampering growth, she added. The problem is that current policies could allow Europe to muddle through in the same way that Japan has been able to muddle through.
Hunter is scheduled to further discuss her ideas for change at the FINforums Annual Hedge Fund Summit on September 14 at the Princeton Club in New York City. Seigenthaler will chair the daylong event.
(CM)