EuroCrisis to Worsen as IMF Fail Shayne Heffernan Says

The International Monetary Fund's spring meetings ended yesterday in Washington, raising more than $430 billion in pledges to help safeguard the global economy. Managing Director Christine Lagarde fell short of her original $600 billion goal as the U.S. declined to participate and Canada proposed making it harder for Europe to tap aid.

There seems little hope of making up the missing $170b and the US position raises the question of the long term viability of Europe.

At Heffernan Capital Management we do not expect Europe to escape without more defaults, the Euro must be significantly devalued or the EU must be broken apart. We also expect to see large scale deleveraging across Europe's Banks.

The debt of the euro region rose last year to the highest since the start of the single currency as governments increased borrowing to plug budget deficits and fund bailouts of fellow nations crippled by the fiscal crisis.

The debt of the 17 euro nations climbed to 87.2 percent of gross domestic product in 2011 from 85.3 percent the previous year, official European Union figures showed today. That's the highest since the euro was introduced in 1999. Greece topped the list with debt at 165.3 percent of GDP, while Estonia had the least at 6 percent of GDP.

The yield on Italy's 10-year bond was up 6 basis points at 5.72 percent at 2:00 p.m. Rome time, pushing the difference with German securities to 406 basis points. The Spanish 10-year yield rose 2 basis points to 5.98 percent.

Italy ended last year with the second-highest debt at 120.1 percent of GDP. Spain's rose to 68.5 percent from 61.2 percent.

Ireland posted the biggest budget deficit at 13.1 percent of GDP, which was higher than the 10.4 percent target under the country's bailout program.

The shortfall was boosted by 5.8 billion euros of capital injected into some banks, the Dublin-based Finance Ministry said in a statement today. Stripping out those costs, the budget gap was 9.4 percent of GDP, the statement said. In all, Ireland has poured about 62 billion euros into its financial system, after a real estate bust pushed some banks to the brink of collapse.

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