Bloomberg News

Investors See No Permanent Solution From Euro Summits, BofA Says

October 21, 2011

Oct. 21 (Bloomberg) -- Most investors expect that next week’s European Union summits will fail to provide a permanent resolution for the region’s debt crisis, according to a survey by Bank of America Corp.

Fifty-one percent of respondents predicted the meetings on Oct. 23 and Oct. 26 will end with a “kick it down the road” solution, the poll of 136 equity and credit investors showed. Thirty-nine percent expected a “sensible plan,” 2 percent said a “shock and awe” announcement is most likely, and 8 percent forecast that nothing new will happen.

European finance ministers met in Brussels today to lay the groundwork for the Oct. 23 summit of government leaders that was the original deadline for a solution to the crisis. An additional gathering was scheduled for Oct. 26 yesterday after Germany and France said the EU needs more time to seal a “global and ambitious” accord. Sixty-five percent of investors don’t expect the talks to stop debt-market concerns spreading to Spain and Italy, Bank of America said.

“We were surprised that 35 percent remain optimistic that sovereign fears can be ring-fenced this weekend,” London-based analyst Derek De Vries wrote in a report today.

Eighty-five percent of respondents to the survey expected the firepower of the euro-area bailout fund, known as the European Financial Stability Facility, to be expanded. The majority also forecast bank recapitalizations of less than 100 billion euros ($139 billion) and writedowns on Greek debt of 40 percent to 50 percent.

Bank Lobby

Alongside plans for a larger rescue fund, European leaders are holding talks with representatives of global bank lobby group Institute of International Finance, including Deutsche Bank AG Chief Executive Officer Josef Ackermann, to push Greek bondholders to accept losses on the country’s sovereign debt that go beyond the roughly 21 percent agreed on in July.

European stocks rose for a fourth week this week, for the longest streak since December, with the benchmark Stoxx Europe 600 Index posting a 0.2 percent gain. The poll was conducted from Oct. 19 through today, Bank of America said.

--With assistance from Aaron Kirchfeld in Frankfurt. Editor: Andrew Rummer

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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