EUROPE - Those countries that pressed hardest for the introduction of the euro should shoulder much of the responsibility of saving it, according to Valentijn van Nieuwenhuijzen, head of strategy in the strategic and tactical asset allocation group at ING Investment Management.
The conclusion would follow logically from a more realistic diagnosis of the crisis, he said, presenting ING IM's mid-year outlook at a press conference in London on Wednesday.
As part of the group's macro view, Van Nieuwenhuijzen presented a six-step 'Master Plan' for saving the euro, which required a "better diagnosis" of the crisis; acceptance that past mistakes would "have to be digested"; further economic integration beginning with banking union; a better firewall, which meant a credible "shock and awe" ability to provide short-term liquidity, probably via the ECB's balance sheet and possibly by giving the ESM a banking licence; a near-term growth strategy, or "Marshall Plan II"; and continued structural reform.
With hindsight, the euro probably would not have been introduced had its inherent risks been fully appreciated, Van Nieuwenhuijzen suggested.
But 12 years on, the lowest-cost solution is a move towards further integration.
"We will get some of these [from the ongoing EU summit] - probably with respect to banking union and a roadmap towards more fiscal integration, and a near-term growth strategy," said Van Nieuwenhuijzen. "But not all six."
And don't expect any progress on the first two steps, he warned.
"A proper diagnosis of the crisis would express much more clearly that it originated with European current-account imbalances and lack of competitiveness in some economies rather than with sovereign problems," he said.
"In addition, we need to acknowledge that the introduction of the euro itself played a very big role in creating these imbalances, and that therefore responsibility for creating these problems lies very much with those members that pushed the hardest for the introduction of the euro."
Van Nieuwenhuijzen anticipates some movement on a near-term growth strategy, which he described as "indispensable", but not enough to override the "dominant austerity agenda".
He emphasised the risk that politicians go from this summit to the next and the next with market tensions continually rising.
But he also observed that European equities were now trading at a price-to-book ratio of 1.19, which is now very close to the 1.17 they hit at the worst point of last September's sell-off.
Dividend yields and the cyclically adjusted price-to-earnings ratio are similarly close to their 2011 highs and lows
"We are not at Lehman levels, so there is downside if we get a real negative break-up story," he acknowledged.
"But if we get a somewhat disappointing, kick-the-can scenario, given where we are in markets, there is room for temporary strength in markets.
"I wouldn't be surprised if markets turn a bit more positive for the rest of the summer. A lot of bad news is priced-in, and cash balances at asset managers are very high and close to post-Lehman levels."