March 20, 2011
Institutional investors increasingly believe Greece and other troubled peripheral European countries will be forced to restructure or default on their debt.
The findings translate into a vote of no confidence in the European Union’s efforts to avert a full-blown debt crisis, despite plans to replace the existing €280bn ($396bn) European Financial Stability Fund with a €500bn European Stability Mechanism, due to be rubber stamped at a Brussels summit later this week.
Some 70 per cent of money managers, hedge funds, proprietary traders and corporate trading desks believe there will be sovereign debt restructurings or defaults in the next three years, says a survey of more than 1,000 investors by Barclays Capital.
This is a dramatic jump from the one-in-three expecting restructurings in the previous survey in December, although that question related purely to expectations for 2011. More than half of investors expect restructurings to spread beyond Greece to other peripheral nations such as Portugal and Ireland, although only 2 per cent expect this to lead to a break-up of the eurozone.
“Investors increasingly believe that the endgame will be restructuring or default in the eurozone,” said Piero Ghezzi, head of economics, emerging markets and FX research at Barclays Capital.
“Clients have decided Greece is almost certain to restructure or default and Portugal and Ireland are also likely to default.”
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