Greylock Capital Management President Hans Humes, whose hedge fund helped negotiate Greece’s debt restructuring this year, said an exit from the euro by the nation would have a “domino effect” in Europe.
The system “is too integrated at this point,” said Humes. “The big domino is Greece and then the next one. There’s are a series of decisions that you have to be concerned about and one is the markets saying we want to clear out of country debt and that’s not the hedge funds, that’s the banks here in Europe.”
A euro exit “would be too big of a catastrophe for both sides,” Humes told reporters at the Institute of International Finance meeting in Copenhagen today, where he participated in a panel on sovereign debt crises.
Humes, who was a member of the committee of private bondholders that negotiated Greece’s restructuring with government officials, said Europe needs to restore confidence in the ability of governments to refinance their debt and guarantee deposits to prevent bank runs. Confidence that economic growth will recover and that bad loans won’t increase will limit the funding needs for Spanish banks, he said.
“What you need is a game-changer on the confidence side, and you also have to backstop the outflows,” said Humes. “It’s probably going to be enough to say we will do something and then take the time to do it. It’s not a set number. It will depend on how bad the crisis is. You’ve got to stop the panic.”
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