Policymaker indecision is undermining market confidence

ON EUROPE

RWC's Peter Allwright believes further bailouts will have to be negotiated to stabilise peripheral economies.

Greece, Portugal and Ireland's sovereign debt levels are unsustainable. Weak growth will lead to explosive debt to GDP ratios. Debt ratios must be reduced, and investor confidence restored before these countries can return to long-term debt markets. We do not believe fiscal austerity and privatisations can achieve this. Greek sovereign debt markets are pricing in a haircut, but policymakers cannot agree on the best course of action, and most are opposed to restructuring. This indecision undermines market confidence. If/when short-term debt markets become too expensive for peripheral g...