Economist Shayne Heffernan on the EuroCrisis

The economic austerity programs demanded by the ECB, IMF and World Bank have adopted by the GIIPS - Greece, Ireland, Italy, Portugal and Spain - the move will of course flatten the economies and possibly break apart the EU.

Certainly there is a need in Europe, as there is in America, to put an end to the welfare state. However the GIIPS nations need to spark their recovery, austerity is not the way to build GDP. Proper spending in areas that help the economy develop, changes in investment rules, privatization are all viable plans that Europe has overlooked.

The other answer is to devalue, but that is not an option in the EU with the single currency policy. The policy is creating a pressure cooker for the small economies that are struggling with high debt levels.

The most likely result now is that there will be across the board defaults in Europe. After allowing Greece to default the ECB has opened the door for all. Italy, Spain, Portugal and Ireland will want the same discounted exit that was given to Greece, and it is hard for the ECB to argue that these countries should pay more to exit their debt traps than Greece did with their default.

HCM have donwgraded all European Asset Classes until the balance of the troubled GIIPS default.

Morgan Stanley had $6.44 billion of net exposure to the five countries, including $4.9 billion to Italy, as of Dec. 31. After it restructured a derivative with the Italian government, which settled on Jan. 3, those amounts dropped to $3.06 billion and $1.52 billion, respectively.

Morgan Stanley's net exposure to the five countries: Greece, Ireland, Italy, Portugal and Spain, was $4.01 billion before hedges, according to figures posted yesterday on the New York-based bank's website. Net exposure to France rose to $4.14 billion from $1.71 billion as of Dec. 31.

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service