KNOWLEDGE CENTER

Knowledge Center Archive

Dec
13
2011

The European Union’s ‘Fiscal Compact’—More of the Same

By SEI Investment Management Unit

Buys Time, but Still Kicks the Can

The agreement forged at last week’s widely anticipated EU summit was similar in character to those that have preceded it since the beginning of the EMU government debt crisis. It includes enough constructive elements to contain the damage for the time being, but does not directly or forcefully address the factors causing the crisis.

The plan consists of two main elements: (1) a planned expansion of firepower available for rescuing troubled debt issuers and institutions, conditional upon (2) tighter, more centralized oversight of EU national governments’ finances.

End of the Euro?

A great deal of ink and bandwidth has been dedicated to the idea that Europe’s government debt crisis could mark the end of the euro experiment. We think that such views are overdone, at least for now.

While businesses and institutions are prudently planning for the contingencies that could arise from Europe’s current troubles, investment managers are also finding potentially attractive values in both fixed-income and equity markets. The recipe for successful long-term investing—ensure that your strategy is still properly aligned with your objectives and tolerances, and if appropriate, use periods of heightened market volatility to rebalance your portfolio opportunistically—remains the same across all market environments.

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The European Union’s ‘Fiscal Compact’—More of the Same

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