Photo: Business Insider
U.S. policymakers are watching Italian bonds while they work overtime behind the scenes to make sure the crisis in Europe doesn’t get out of hand.That’s according Goldman Sachs Asset Management chairman Jim O’Neill, who was just on CNBC this morning discussing the euro crisis. He told CNBC what he’s been hearing:
Of course, we’ve had your Treasury secretary, Tim Geithner, in Germany for much of the last week. I’m reminded by a couple of things I’ve picked up on in conferences and meetings I’ve been at in the States this year. The top U.S. policymakers, rightly or wrongly, feel that something going badly wrong with European bond spreads – or, one that shall remain nameless said at an event of ours that Italian bond yields would be the biggest re-election threat to Obama.
It’s pretty clear to me that, going back to the Mexico G-20, that behind the scenes, U.S. policymakers are getting more and more involved in trying to find some lasting solution that perhaps they could even play a role in.
However, O’Neill is optimistic on how some of the crisis-stricken peripheral nations in Europe are progressing:
It’s not entirely clear to me that Spain can do anymore than it’s been doing. In fact, if you look at the PMI numbers we had last week, Spain is one of the very few places that showed signs of improvement – and that’s across the world.
And as Draghi also pointed out at his conference – and is not being picked up on much by people except all the comment about doing whatever he can to save the euro – quite a few of these peripheral countries, particularly Portugal and Ireland, but also Spain, are showing notable improvement in their unit labour costs. This idea that they can’t change and they can’t grow again in the future is sort of understandable, but it may not be right. You saw very little hints of it last week in that PMI for Spain.