Templeton says euro zone recession fears exaggerated

Analysis

Mark Mobius, managing director, Templeton Asset Management, claimed that widespread and ongoing fears of a European-wide recession have been exaggerated, Eurofinance said in a press release.

Mobius suggested the crisis is being led by repetitive and deepening pessimistic sentiment. The reality, he believes, is that excellent buying opportunities, increased liquidity and a new US administration will create favorable conditions for a rapid recovery in late 2009.

Commenting on the economic outlook for the eurozone Mobius said: “This crisis remains in the mind, rather than in reality. The likelihood of a European-wide recession is very small and any downturn in the markets will be short-lived. In fact there are now some good opportunities for bargain hunters to buy stocks at excellent prices. Importantly, we're experiencing very dynamic economic and political conditions. We are now in a multi-polar world, with increasing amounts of liquidity in the markets especially from the Middle East, Russia and US. A new administration in the US is also more likely to focus on resolving domestic issues. A combination of these factors points to a fast recovery in Europe later next year, with Poland likely to be the first to recover due to strong macroeconomic indicators.”

Mobius also expects that the euro will continue to strengthen against the dollar and added: “European policies call for a sound euro in the longer term and the dollar will experience some weakening due to lower interest rates. As a result, we are forecasting the euro to be a stronger currency than the dollar over the next 12 months.”

His comments are supported by EuroFinance's business confidence survey, where 72.4% of finance directors and Treasury Executives from the largest multinational corporations in Europe, believe the eurozone will not go into a recession this year. Similarly, 60.2% of respondents of the business confidence survey believe the EU will grow faster than the US. (press release)

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