As Greece finds itself making headlines once more, eurosceptic John Redwood has warned a euro break-up is still on the cards.
Redwood, chairman of the investment committee at Evercore Pan-Asset, said he is willing to miss out on near-term upside in European markets because he sees greater risks on the downside.
“We are cautious euroland may see another nasty flare-up. We are prepared to miss out on a short-term rally because we think there are still deep-rooted problems there. There could be another lurch downwards,” he said.
“I think a euro break-up could still happen – you cannot rule it out. Scandinavian and Latin American currency unions have broken up in the last century, and we saw the break-up of the ruble. There are the same tensions, but different politics, in Europe.
At the moment, the Greek, Spanish and Portuguese economies are suffering very badly because of all this and are finding it hard to adjust.”
Redwood said German bunds would be a good asset to back for investors expecting a collapse in the single currency, although they are potentially a very volatile asset.
“A euro break-up would see you making a lot of money in bunds, but if the euro survived you would see Germany shouldering more of the cost,” he added.
Meanwhile, the US and UK are better placed than the stressed euroland nations to move towards economic recovery, according to Redwood.
The UK’s strengths are the financial centre of the City of London, and the fact it has freedom to set its own currency rate, while the US has the edge in terms of energy, technology, and growth, he said.
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