Brussels' power grab will break up eurozone - Saxo Bank

The eurozone's financial sector will “drown” in “self-defeating” regulation, which will eventually "destroy" the healthy banks, as the single-currency bloc breaks apart, says the boss of Denmark’s Saxo Bank.

Lars Seier Christensen, chief executive of Saxo Bank, said he expected more surprises in the “eurozone minefield”, which were assured, he added, after the unexpected bail-in of depositors in Cyprus.
By Rebecca Clancy: Lars Seier Christensen, chief executive of Saxo Bank, said it was clear that the eurozone would eventually break up as Brussels claimed even more power and used it “ever more poorly”.

The break-up of the 17-nation bloc could take shape in several forms, Mr Christensen said, including the weaker countries leaving, which he believes could be done for cheaper than the current and future bailouts.

Another option could be the evolution of a multi euro-currency zone, where countries with similar economic conditions grouped together, he suggested.

Perhaps the less likely, but still possible, would be that Germany leaves the single currency. The bank boss argued that as the bills begin to pile up for the eurozone's largest economy, this option would seem an attractive solution to the country’s citizens.

However, he said all of these option would “require rationality returning” to Brussels, which “does not seem to be on the cards”. 

As a result, he said he expected the eurozone to remain in recession for years to come, with the likelihood that it would deepen into a depression.

“Forget about recovery in six months, it will always be six months from now,” he said.
“Euro denominated assets will remain unattractive, and downright dangerous, to hold for years to come,” he added.
Another expectation was more surprises in the “eurozone minefield”, which he said were assured after the unexpected bail-in of depositors in Cyprus.
Savers in the Bank of Cyprus took a hit at the end of April as 37.5pc of their uninsured deposits were converted to equity as part of the island's €10bn (£8.4bn) rescue deal.
“Cyprus was a template,” he said. “Expect not only bail-ins, which if defined clearly ahead of time could be part of the solution, but also outright confiscatory wealth taxes, disguised as solidarity payments.”
Mr Christensen said bank runs could start “instantaneously” as “normal” depositors that had worked hard to save up for their family viewed their mattress as a safer place for their money than their bank.
“Of course, the answer to bank runs is capital restrictions. Expect a lot more of that,” he added.
“They are always introduced as short term and temporary, but very hard to remove once in place.
“There are a lot of things to worry and think about if you are a citizen or investor in the eurozone.”

Source

banzai7