Threadneedle’s Cielinski: Eurozone could be a success story

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Threadneedle Investments head of fixed income Jim Cielinski is confident of recovery in the eurozone but acknowledges changes are needed.

Cielinski, who manages several Threadneedle funds including the £378m Threadneedle Defensive Equity & Bond fund, notes that progress on government borrowing costs has been made as investors become reassured that sovereigns are unlikely to default.

Cielinski says: “We think they can pull it off and I think the eurozone could be a success story. You can see rates coming down because they are protected against default.

”Default risk is coming down and it is helping the eurozone getting more sustainable. And fiscal adjustments are getting less tight.”

However, Cielinski is mindful of obstacles and is critical of the amount of work the ECB has done, when compared to other central banks around the world.

He says: “If there is no global growth, they are in a tough spot. I think the pushback on austerity was key. The ECB has kind of ridden on the coat-tails of other policymakers. But that said, I still think they can succeed but a lot of conditions apply to that.”

The manager believes more work is needed by the authorities in terms of liquidity and a greater convergence between eurozone members’ policies, to enhance similarity between them and remove a “destabilising force” from the situation. 

Cielinski adds that he is finding opportunities in some parts of the eurozone periphery.

“We are long Italy and Ireland and we are a bit worried about Spain. Their issue is a banking problem – they need more liquidity. We like the periphery.”

”I think France is probably one of the bigger worries. There is an inertia in France which makes it harder to get out of the crisis.”