EUROPE - The single currency is damaging schemes' European investments and is set to push Germany into a decade-long recession, warns State Street Global Advisors.
The fund manager claims that the efforts of European nations to boost their flagging economies are being hamstrung by their membership of the euro.
It said that countries that are slipping into recession are unable to turn things around because they have effectively ceded economic sovereignty to the EU.
SSgA group chief investment officer Alan Brown said that, due to the effects of the euro, there is “a real risk” of Germany joining Japan in suffering deflation.
He explained that the deutschmark joined the euro at a rate 20% over its true worth, and for it to reach its true level, Germany will have to maintain near zero inflation.
“We face the real prospect of the world’s third largest economy, Germany, joining the world’s second largest economy, Japan, in deflation.”
But Isis Asset Management head of European equities Davina Curling disagreed.
She said that, despite the euro being the “thorn in the side of Europe”, schemes should increase their exposure to Germany.
The country has endured so many problems, it was unlikely to get much worse, she said.
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