Bloomberg News

Euro Needs Restructuring, Coordinated Policies, FX’s Taylor Says

September 15, 2011

Sept. 15 (Bloomberg) -- John Taylor, founder and chief executive officer of FX Concepts LLC, said the euro has to be reorganized amid a failure to continuously coordinate policy.

The European Central Bank said it worked with the Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank to extend three-month loans to euro-area banks in an effort to ensure they have enough cash for the rest of the year, as policy makers seek to contain the European sovereign- debt crisis.

“It certainly doesn’t get at really any of the major problems at all,” Taylor said today in a panel discussion at the Bloomberg Markets 50 Summit in New York, tied to the magazine’s ranking of the 50 most influential leaders in global markets, finance, business and government. “Continuous coordinated action” is needed, he said.

The central banks acted after dollar funding dried up for European banks in general, and French lenders in particular, amid concern Greece is headed for a default. Credit Agricole SA and Societe Generale had their long-term credit ratings cut one level this week by Moody’s Investors Service, which cited their reliance on short-term funding and Greek exposure.

Yields on Greece’s two-year debt fell to 61.5 percent from 74.5 percent yesterday, according to Bloomberg data. Greek Prime Minister George Papandreou committed yesterday to meet deficit- reduction targets demanded as a condition for international aid, according to a statement.

‘Horrific Cocktail’

“There is such a horrific cocktail that we have, which is monetary restraint, tightness and fiscal austerity,” said New York-based Taylor, founder of the world’s largest currency-hedge fund. “It’s an unbelievably bad mixture of policies.”

The euro rose 0.9 percent to $1.3883 at 1:55 p.m. in New York, after gaining as much as 1.3 percent, the most since Aug. 15. The dollar strengthened as much as 0.9 percent against the yen before trading at 76.68.

“The euro has to be restructured,” Taylor said. “Germany is going to come out on the top side of that.”

French President Nicolas Sarkozy and Germany’s Chancellor Angela Merkel “are convinced that the future of Greece is in the euro zone,” a French statement said yesterday after they and Papandreou held a conference call to discuss Greece’s credit crisis.

“It ought not to happen,” Taylor said of the possibility of Greece leaving the euro. “It’s getting pushed that way and nobody is doing anything to stop it,” he said.

No country can afford the breakup of the euro, said Annalisa Piazza, a fixed-income strategist in at Newedge Group SA in London. Companies and banks as well as the sovereign of any nation that left the euro would default, she said today during the same panel discussion at the Bloomberg Markets 50 Summit.

--With assistance from Matthew Brown in London. Editor: Paul Cox, Dennis Fitzgerald

To contact the reporters on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net; Paula Dwyer in Washington ar Pdwyer11@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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