Saturday, January 26, 2013

Davos 2013: Irish PM says UK exit would be bad for EU


The Euro in Perspective

I'm commenting about the interview in Davos with the Blackstone Group's John Studzinki, by Reuter's Alex Smith (January 26, 2013) on future prospects of the Euro, which deserves clarity. See "Real Estate in Europe Ripe for Plucking".

Studzinki is correct in his assessment that Europe is calmer. Certainly, there is a greater sense of ease and patently absent is the rush from the madding notion that the Euro will collapse. However, the prospect of the Euro collapsing, of Germany and France being wiped into economic oblivion and of investors in the Euro having to take a bath, was never on the agenda. What is relevant, is whether the Euro will continue to exist in its current form or not.

Although some investors take comfort in the fact that governments are not caught in their regular fox hunt, seeking debt restructuring and assuring investors that the ECB has sufficient funds for a bail out (if the rabbit cannot be found), it's not over until it's over, and the likelihood of PIIGS vacating the Euro still remains high.

Is this a danger to the Euro currency or to European unity per se? No, it doesn't have to be that way, contrary to some opinion that makes its rounds in the coffee houses of some institutions located in the public service or to those who feel that their jobs, financial interests and vested future lies in the Euro, in its current state.

However, a Euro with PIIGS out of the way (although still very much part of the EU) will make for a stronger currency and a quicker resurgence of growth in Europe, which is currently sadly lacking.

Blackstone's Studzinki Declares Real Estate in Europe Ripe for Plucking

In an interview with Reuter's Alex Smith, John Studzinki from the Blackstone Group declared that Europe is much calmer (See Author's "Future of Euro's Sustainability is Vulnerable"), that the concern of a collapse of the Euro had been removed and consequently, U.S. companies that were flush with cash, would possibly consider European opportunities as a target for investment. This was particularly true as a result of low yields in the U.S. as business continues to generate cash in an "all dressed up, no where to go" mode.

Although Mr. Studzinki is remaining mum on whether Blackstone will be making further investment in Europe, he did concede that institutions' willingness to shed their real estate portfolios in Europe is lagging, and that the possibility of further activity in this arena is probable.

Asked whether banks would become a source for M&A, Studzinki believed that given the regulatory restructuring that was taking place, it was unlikely that banks themselves would present themselves as attractive investment opportunities.