Bloomberg News

Euro Zone Will Break Up as Voters Reject Bailouts, Invesco Says

November 26, 2011

Nov. 25 (Bloomberg) -- At least one European country will leave the euro zone as voters lose patience with austerity measures and bailout packages, according to Invesco Ltd.’s Chief Economist John Greenwood.

“Ultimately we will see one or more countries exit from the euro zone,” Greenwood said today in an interview broadcast on the Atlanta-based fund manager’s website. “The fundamental issue is this: you’ve got two sets of economies with different rates of growth, of productivity and different work ethics.”

Invesco, which manages $598 billion of assets, joins investors and policy makers who say the European monetary union is on the verge of breaking up as bond yields in Italy touched a 14-year high. Greece’s central bank this week said implementing budget cuts represents a “last chance” to stay in the euro zone. Bill Gross, who manages the $244 billion Pimco Total Return Fund, last week said Europe is “in flux and very dangerous.”

“Putting them together in a single currency union has been causing greater divergence of competitiveness,” Greenwood said, referring to northern countries such as Germany and the Netherlands and southern European nations such as Greece and Spain.

Voters in the north will likely say “no more bailouts” while voters in the south will push for “no more austerity,” prompting the breakup of the union, Greenwood said.

Italy, the euro zone’s third-largest economy behind Germany and France, today sold 8 billion euros ($11 billion) of six- month Treasury bills at a rate of 6.504 percent, the highest since 1997 and up from 3.535 percent at the last auction on Oct. 26.

--Editors: Jon Menon, Stephen Taylor

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net;


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