GREECE could be thrown out of the euro within two months because it cannot cope with its colossal debts, according to a leading Yorkshire-based investment manager.
Simon Martin, who is based at Charles Stanley’s Leeds office, also warned that the European banks could stop lending to each other due to a breakdown in trust; a scenario which brings back memories of Lehman Brothers’ collapse in 2008.
He made the comments as research from Barclays Stockbrokers suggested that almost half of UK investors are turning their backs on Europe.
Forty four per cent of respondents to a Barclays Stockbrokers’ survey said they had re-focused their portfolio away from Europe, with 27 per cent favouring the UK. The results are based on a survey of 559 investors which was conducted between January 20 and January 25.
Paul Inkster, head of product at Barclays Stockbrokers, said: “Following sustained market turmoil in the eurozone and multiple ratings agency downgrades, investors are taking action and are seeking returns elsewhere.”
Mr Inkster said Barclays had seen trading volumes increase significantly recently.
He added: “There is no doubt that investors are acting despite the uncertainties and the challenging investment environment.”
Mr Martin said he was still wary of the situation in Europe, and preferred to err on the side of caution.
He added: “I believe that Greece will be thrown out of the euro when the Germans get sick of bailing them out. This could be as soon as March but they will probably limp on for 12 to 15 months.
“There is very little hope for them as they require 36 per cent GDP growth to get back to a balanced position.
“The European banks are in a very precarious position, especially the French and German banks and as a result we could see a repeat of the situation after the collapse of Lehman brothers when the banking sector stops lending to each other as they don’t know who to trust.”
According to Mr Martin, the banks need to restore balance sheets and borrow huge amounts of money just to meet European regulation on tier 1 collateral.
He added: “Many will struggle to do this. This is why many companies have altered their finances to avoid reliance on the banks and have built up capital levels and reduced debt.”
Mr Martin said he didn’t believe the euro would collapse, because there is too much political capital tied up in it.
German industry could not afford to lose the competitive advantage that the euro gives it, he added.
Mr Martin said: “Adopting a contrarian approach, we are starting to look at European funds with a view to gradually buying back into the general European market.
“We think that buying when everyone is focusing elsewhere will allow us to add value to portfolios. We are building our list of attractive core funds and satellite funds.
“We are not ready to invest yet, but feel that we will get a buying opportunity over the next three to six months.”