Russian International Reserves Fall $15.7 Billion in Week to Dec. 19

Europe’s Architecture Is ‘in Play’ Amid Fiscal Crisis, UBS Says: Tom Keene

European leaders are playing a “huge game of brinksmanship” as they grapple over who should shoulder the burdens to resolve the euro region’s debt crisis, said UBS AG’s George Magnus.

“The architecture of Europe is now in play,” Magnus, senior economic adviser at UBS Investment Bank in London, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “It’s reaching a very important tipping point.”

European Central Bank President Mario Draghi slammed the 17-nation euro region’s governments today for failing to implement policy commitments. German Chancellor Angela Merkel yesterday rejected French calls to deploy the ECB as a crisis backstop, defying global leaders and investors calling for more urgent action to halt the turmoil. The leaders risk having the market force a resolution to the crisis, Magnus said.

“Germany will make compromises and concessions gingerly if they see hard evidence that debtor countries are taking stern measures to be more disciplined with their fiscal policies and their spending,” Magnus said. “The problem is, the harder you insist that debtor countries go down this deflationary policy route, the more likely it is that the whole system will come down, with debtors bringing their creditors with them.”

The euro has lost 5 percent against the dollar over the past six months. It traded at $1.3528 today, headed for a third weekly loss.

Investors shouldn’t count on the ECB stepping in as a lender of last resort, he said.

“The idea that the ECB printing money in the way that the Federal Reserve, the Bank of England have done to date, that’s a line they won’t cross,” Magnus said.

The Fed has bought $2.3 trillion of assets in two rounds of quantitative easing to support the U.S. economy. The British central bank expanded its bond-purchase program by 75 billion pounds ($120 billion pounds) to 275 billion pounds on Oct. 6.

To contact the reporters on this story: Cordell Eddings in New York at; Tom Keene in New York at

To contact the editor responsible for this story: Dave Liedtka at

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