May 16, 2012 – 1:14PM
ANZ chief executive Mike Smith said the breakup of the eurozone was “quite likely” as countries in the region’s south would have to decouple from the currency union in order to become competitive.
The comments by the senior Australian banker come as global markets continue to be rattled by the political uncertainty playing out in Greece.
A left-wing party opposed to the austerity pact is leading opinion polls after last week’s elections failed to form a government. Fresh elections may take place in Greece on June 10 – at the earliest.
“The issues in Europe are going to be very difficult to manage and it’s not clear what the answer will be,” Mr Smith said in an interview with Bloomberg television.
“On the one hand you need a proper transfer union, and that seems very difficult for the German voter to accept,” he said. “Or countries in the south are going to have to become detached from the euro, because otherwise how can they ever become globally competitive,” he said.
“It is the uncertainty and the unknown that is creating a lack of confidence in the market”.
Mr Smith made the comments in Beijing after ANZ last night detailed plans to invest $300 million and more than triple its branch network in China. ANZ’s exposure to the eurozone was small, he said. But those banks that are operating in the region would be working to minimise their cross-border risk, he added. ANZ yesterday said it planned to increase the number of branches in China to 20 in the next five to 10 years, up from six now. The capital increase, which is subject to regulatory approval, is the first since the Australian bank invested $395 million while incorporating its Chinese unit in 2010.
Mr Smith’s was speaking a day after former Australian Treasury secretary Ken Henry said the eurozone was highly unlikely to survive. Dr Henry said he never believed the troubled currency union would work given it allowed countries to run budgets independent of each other.
gerry's blogistic digression 