“It would be good if weak countries were kicked out or left the currency union,” Faber said in an interview in Zurich today. “It would be the better solution than denial.”
European leaders are struggling to contain the debt crisis, which forced Greece, Ireland and Portugal to seek external aid. German Chancellor Angela Merkel has made a deficit-control treaty the centerpiece of efforts to combat the turmoil, counting on stiffer fiscal rules to restore investor confidence in public finances across the 17-nation region.
The European Central Bank last month extended its use of unconventional tools to bolster bank lending and cut borrowing costs to 1 percent, matching a record low. The central bank has also been forced to purchase bonds of distressed nations.
Asked whether he’d purchase euro-region government bonds, Faber warned of a “high-quality state-bond bubble” and said that “it’s probably better to invest in shares.”
“Last year, we have seen high volatility, large swings,” on equity and bond markets, he said. “I expect this volatility to remain or maybe even increase this year. Shares are more attractive than bonds overall.”
Faber said the ECB will “probably continue to print money in a direct or indirect manner,” and that the “worst part of the crisis is still ahead of us.”
--Editors: Patrick G. Henry, Leon Mangasarian
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