Solution to euro crisis requires major ‘cultural' shift

ON ASSET ALLOCATION

Markets are understandably dominated by the debacle that is the European debt hole, where a ‘solution' is followed by the unfurling of yet another uncomfortable development.

Your guess is as good as ours as to what will be the final outcome, and this nervousness is only compounded by the potential demise of the euro. It is highly unlikely that over the coming weeks we could revisit the markets lows that were last seen in August. Italy is too big to fail, yet is too big to haircut its debt but, eventually, something will have to give. If the euro devalues, or we see the emergence of a two-tier Europe (one with the euro and one without), we expect to see higher inflation and for recessionary conditions to spread elsewhere. In order for Europe to survive,...