The European Union will survive and the US economy will bounce back, according to international experts speaking at a CMSF plenary session.
Andreas Huebner, senior managing director of Lazard, said the “EU will survive no problem” but acknowledged there was a long way to go, with economic fundamentals still weak.
He sees the real problem as that of unemployment, with youth unemployment up to 50 per cent in some countries.
He warned investors that all government debt was credit, and that investors should not treat it as secure.
But he also said that debt was not a problem unique to Europe, but it was just more openly discussed there.
While Huebner, who identified France and Italy as particular problem countries, said the EU would survive, it was unlikely that a fiscal or political union would prevail.
US in recovery
Meanwhile George Siguler, managing director and founding partner of private equity firm, Siguler Guff, said the US economy was in recovery.
“The US economy is still a mess, but it is in recovery. It is slow but moving in the right direction,” he said. “It’s been a rough ride.”
It is not only the US federal debt, which at $17 trillion is equal to the debt around the time of World War II, but the social security unfunded liabilities are also around $17 trillion.
“There are only four ways a government can fix this. They can tax, spend less, grow or inflate,” he said. “Can we effectively make this happen? We have to.”
Similarly on the upside, Siguler said the US is going through a revolution in energy, with its natural gas at a quarter of the world price and a new-found self-sufficiency in oil.
The US has also seen considerable growth among smaller companies, where Siguler Guff as a private equity firm invests.
“We have 250 small companies we invest in, they grew throughout the crisis. We started with 45,000 jobs and ended up with 55,000. There are thousands of companies in the US like that.”
He also said companies are globalising, presenting unique opportunities for investors.
“My recommendation for stock investors would be to look at companies like Johnson and Johnson, or Unilever or Boeing. They are unique businesses.”
Siguler, who also sits on the board of MSCI and the IMF Pension Fund, said there was a time when “your investment partner was your partner, your fiduciary. Now every transaction with a financial services firm is adversarial.”
|Day 1 newsletter from CMSF 2013|