GLG’s Lagrange offers options for euro debt solutions

July, 2012 Print

GLG’s Lagrange offers options for euro debt solutions

Pierre Lagrange, hedge fund manager of the GLG European Long Short Fund, has put forward suggestions for tackling the Eurozone debt crisis which is threatening to damage the global economy.

Lagrange said it should be possible for the European Central Bank (ECB) to underwrite existing and future debts of Eurozone governments without moral hazard, if this is conditional on each country achieving budget deficit and debt targets within a fixed time horizon of, say, five years. In addition, he said that sovereigns should pay for ECB guarantees on new short-term debt through a fee of, say, 50 basis points a year.

“If the ECB, backed by the governments, announces something similar to the proposals outlined above, I believe the markets will massively correct the current negative stance. Investors will price in what they perceive to be the probability of countries achieving their debt and deficit targets within the five-year protection period provided by the ECB,” he said.

On Greece, Lagrange said it should leave the euro, given its predicament, as it had gone too far to be saved as a Eurozone member. “While I have total sympathy for trying to preserve the European construction and limit the humanitarian disaster unfolding within it, I have yet to see anyone making a realistic case as to how Greece can possibly remain within the Eurozone, without the moral hazard of writing off their whole debt,” he commented.


Related Posts

Comments are closed.

Follow by Email