European leaders have a matter of weeks to act before the break-up of the eurozone becomes a real possibility, according to GLG’s Christophe Akel.
Akel, a co-manager of the £81.1m GLG Global Corporate Bond fund, says the market is placing intense pressure on the eurozone to resolve its problems immediately, even though the necessary reforms are likely to take years to complete.
“You can’t expect a country to fix its problems in a matter of months, it’s going to take a very, very long time. But the issue we have right now is that the market is just not giving any time,” he says.
“The political leaders are to blame, but they are not the only ones to blame. I think the market’s sometimes a bit harsh.”
Akel predicts the European Central Bank (ECB) is “ready to act” by intervening directly in the markets when bond yields rise too high and place countries at risk of entering a “death spiral”.
He suggests a commitment to intervening when yields reach about 6% would allow some confidence to return to the market. However, he says Germany is unlikely to approve this until countries on the eurozone periphery make more progress on fiscal reform.
“We’re close to survival mode. They can’t wait another six months to start being serious about the issue, they have a couple of weeks at best,” the manager warns.
Akel, who also manages the new GLG Strategic Bond fund, which has a more flexible mandate, claims the spreading debt crisis means the German Bund is not the safe haven that traditional wisdom dictates it to be.
“If you have the flexibility and you’re smart enough, you don’t buy Bunds – you buy something else which is still AAA but doesn’t have all the uncertainty about what’s going to happen to Germany as the only strong country in a weak economic zone,” he says.
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