“The lack of political unity,” says James Dailey, “is likely to be the downfall of the euro.” Dailey, the macro fund manager who is CIO of TEAM Financial Managers in Harrisburg, Pa., said his opinion on the dire outlook for the euro and the European Union itself hasn’t changed a whit despite the recent developments in Europe, including last week’s EU/IMF bailout of Ireland and Portugal’s 2011 austerity budget.
In an e-mail interview on Monday, Dailey characterized the bailout of the Irish banking system as “really a bailout of German and U.K. banks on the backs of Irish taxpayers,” and he suspects that “the more these kinds of arrangements are made, the greater the likelihood of widespread political/societal upheaval” on the continent.
In a follow-up to a phone interview on the European debt crisis with AdvisorOne on Nov. 16, Dailey raised the highly charged “haircut” issue: “The political elite in Europe have made it clear that protecting senior bondholders is something they are willing to bet the farm on, just as the U.S. elite decided. They are likely to continue until market crises make it impossible, via a currency and/or bond market crisis” or if political upheaval “shakes up” the ruling elite.
Dailey (left) thinks there’s a good chance “we will get some of both over time,” and points in particular to German Chancellor Angela Merkel’s “reversal on sharing the pain” as a clear indication that there is “zero appetite for restructuring within the current leadership.”