The eurozone is unlikely to break-up in the
near future, as long as the current co-operation between Germany
and France continues, research from UBS suggests.
UBS wealth management research, Breaking
up the eurozone: Unlikely but not unthinkable, looked at a
number of themes including breaking up the currency union; currency
reform and exchange rate adjustments; redenomination of financial
obligations; and how a break-up would impact financial and real
assets.
Go deeper with GlobalData
Theme matches PBI editorial
advisory board
UBS’s research matches many of the projections of PBI’s editorial advisory
board, which predicted, while uncertainty remains over the
future of the euro as a common currency, an immediate break-up is
unlikely.
Long-term, the UBS research team said a
currency and monetary union cannot survive without being linked to
a single state.
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By GlobalData“The chances of long-term survival of the
eurozone are thus closely linked to the assessment of whether the
eurozone can be rebuilt into a fully-fledged political union,” the
team added.
Low exposure to eurozone
UBS said it advised investors not to make
investment decisions based solely on the anticipation of a
near-term partial or full break-up of the eurozone.
“Nonetheless, risky assets in Europe will keep
underperforming. As a consequence, investors outside of Europe
should consider holding only a low exposure to the region for the
time being,” the report said.
“European investors should avoid bonds, stocks
and real assets in the peripheral countries and prefer lower-risk
assets from core European countries. They should also diversify
globally to include exposure to markets that would be less impacted
by an adverse outcome in Europe.”
