European debt situation is significantly worse than 2008

Michael Platt, head of a $30 billion hedge fund, BlueCrest Capital Management LLP, provided his thoughts on the sovereign debt crisis in an interview yesterday with Bloomberg. Platt contended that Italy’s financial situation is likely to worsen significantly over the next year and that “much more radical measures” are needed to prevent such a dire outcome from occurring. “If Italy and Spain are forced to roll their debt over, if they have to pay rates between 5 and 7% for this, then the situation in Europe is unsustainable. We’re not going to have any euro bonds, we’re not going to have a full political and fiscal union where the transfers can take place. It seems what we’re going to have is an attempt to control the European situation through continued austerity, which is pro-cyclical. As the economy slows down, we end up with more austerity which creates more slowdown.”

When asked to compare the 2008 financial crisis to the current situation in Europe, Platt responded that “What’s going on now is significantly worse than 2008…The European debt situation is fundamentally completely unstable. The process of refinancing your debt with a real rate of 5 when you have negative GDP growth, and we are heading into a recession in Europe, arithmetically can turn all of the countries in Europe, given enough time, into Greece.”