Bloomberg News

Europe Must Move Fast to Stem Losses, Weinberg Says: Tom Keene

December 06, 2011

Dec. 5 (Bloomberg) -- European policy makers must quickly take more coordinated fiscal and monetary action to head off major losses by banks amid the region’s sovereign-debt crisis, according to Carl Weinberg of High Frequency Economics.

Officials “have to find a way to stabilize the banking system fast,” Weinberg said today in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “It’s the only way out of this.”

Leaders in Europe should move quickly to head off bank losses and to stimulate economic growth, said Weinberg, founder and chief economist of Valhalla, New York-based High Frequency.

They should set up a program similar to the U.S. Treasury Department’s $700 billion Troubled Asset Relief Program, which provided capital to shore up banks during the U.S. financial crisis, he said. They also should immediately adopt a monetary policy that “prints as much money as it can,” he said.

“The end of the year is coming quickly, and when banks close their books they will have to confess up to the losses they’ve had on their bunds,” or German government bonds, Weinberg said. “Those losses are going to be big. Balance sheets are going to be impaired.”

The call today by German Chancellor Angela Merkel and French President Nicolas Sarkozy for a rewrite of the European Union’s governing treaties to tighten economic cooperation will not be enough to curtail the crisis, Weinberg said.

Merkel and Sarkozy, after a meeting in Paris, presented a common platform for a Dec. 8-9 summit of EU leaders in Brussels that aims to halt the crisis now in its third year.

Germany’s benchmark 10-year security fell today, pushing its yield up seven basis points, or 0.07 percentage point, to 2.20 percent. German government debt lost 0.4 percent in November and 0.8 percent in October, according to Bank of America Merrill Lynch indexes.

--With assistance from Ken Prewitt in New York. Editors: Greg Storey, Paul Cox

To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

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


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