(The following statement was released by the rating agency)
Nov 20 - European investors are cautiously optimistic about a resolution of the eurozone crisis, believing that recent policy announcements represent major positive steps although significant risks remain, according to Fitch Ratings’ quarterly investor survey.
A solid majority of 86% said policy announcements such as the European Central Bank’s Outright Monetary Transactions commitment to buy sovereign bonds of countries under a policy-conditional programme with the European Stability Mechanism or European Financial Stability Facility, and plans for a banking union, are major positive steps towards resolving the crisis. But 81% of respondents acknowledge that significant economic, financial and political risks remain.
Fitch agrees these are positive steps that reduce the risk of a self-fulfilling liquidity crisis - or even a solvency crisis - derailing vulnerable sovereigns. However, there was limited progress towards banking union at the October EU Summit. Lack of momentum could damage the credibility of policy makers’ efforts to solve the eurozone crisis and increase the eurozone’s vulnerability to market pressure.
To boost their credibility, policy-makers must deliver on their self-professed goal of a “specific and time-bound roadmap” for a “genuine” Economic and Monetary Union at the December Summit. This must answer outstanding questions and address the apparent disputes between some euro area member states.
The remaining 14% of European investors polled were more pessimistic, saying that the policy announcements will have little impact. They expect market pressure will soon mount again on Spain and Italy.
The Q412 survey was conducted between 2 October and 6 November and represents the views of managers of an estimated USD7.4 trillion of fixed-income assets. We will publish the full survey results in mid-November.