Bloomberg News

Barroso Blaming U.S. for Euro Crisis ‘Foolish,’ Investors Say

June 19, 2012

European Commission President Jose Manuel Barroso’s claim that the U.S. is to blame for Europe’s debt crisis is “foolish” and further undermines confidence in the region, investors managing more than $400 billion said.

“This crisis did not originate in Europe, this crisis originated in North America,” Barroso told a press conference at the Group of 20 meeting in Mexico late yesterday. “Our financial sector was contaminated by, how can I put it, unorthodox practices from some sectors of the financial markets.”

Leaders including U.S. President Barack Obama and German Chancellor Angela Merkel are meeting in Mexico to attempt to fix the European debt crisis that’s threatening to plunge the global economy back into recession. They gathered after Spain’s borrowing costs soared to a euro-era record and elections in Greece failed to damp the threat of contagion.

“What is the point of this statement?” asked Yves Bonzon, chief investment officer of Geneva-based Pictet & Cie, which manages $387 billion. “It is shocking. What’s the contribution to improving the situation? Nil. If anything he’s contributing to destroying further what’s left of confidence in the system.”

G-20 leaders focused on steps to stabilize euro-area banks, raising pressure on German Chancellor Angela Merkel to expand rescue measures. While Merkel rejects pooling euro-area countries’ debt or boosting deficit spending, Obama has blamed the financial crisis in the world’s second-biggest economic bloc for slowing U.S. employment growth.

‘Reflects Badly’

“The Federal Reserve did not cause Greece’s indebtedness, Italy’s indebtedness or the Spanish banking problem,” said Mike Lenhoff, chief strategist at London-based Brewin Dolphin Holdings Plc (BRW), which manages 25 billion pounds ($39 billion). “How could he say that? It looks a bit foolish and reflects badly on him.”

In blaming the U.S. for Europe’s crisis, Barroso risks reigniting old tensions. In 2009, then French President Nicolas Sarkozy blamed the U.S. and U.K.-led economic model for the financial crisis triggered by the collapse of Lehman Brothers Holdings Inc. in 2008.

“The crisis has come from the drift of an Anglo-Saxon model,” he said in December 2009. “For the world, I want the victory of the European model, which has nothing to do with the excess of financial capitalism.”

Bonzon disagrees. “The extent of the bad assets in Spanish banks is a multiple of what the problem was in the U.S.,” he said.

The pressure of fixing a crisis that has been steadily growing for three years may be now starting to show in Barroso, according to Lenhoff. Barroso, 56, became president of the European Commission in 2004 after stepping down as prime minister of Portugal. The Commission is the European Union body that designs laws for the region.

“If he was to look at his comments in the cool light of day he may realize that was a silly thing to say,” Lenhoff said. “It’s a reflection of the pressures everyone is under more than anything else.”

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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