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High Frequency’s Weinberg Says Europe Should Shore Up Banks

Economist Carl Weinberg
Economist Carl Weinberg. Photographer: Jin Lee/Bloomberg

European Union leaders meeting in Brussels today should shore up the region’s banks and focus on Greece’s debt crisis instead of longer-term regional accords, according to economist Carl Weinberg.

European leaders should pledge 300 billion euros ($393 billion) for the European Financial Stability Facility to ensure that no European banks fail, Weinberg, founder and chief economist at High Frequency Economics in Valhalla, New York, said in an interview. He said leaders should ensure that Greece avoids default instead of talking about a treaty for European fiscal integration.

“Put money on the table,” Weinberg said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “Put that money on the table so everybody knows that no bank will be allowed to fail, that every bank is safe.”

EU leaders gathered in Brussels for their first summit of 2012 as a deteriorating economy and the struggle to complete a Greek debt write-off deal risk sidetracking efforts to stamp out the financial crisis. EU chiefs plan today to put the finishing touches on a German-led deficit-control treaty and endorse the statutes of a 500 billion-euro rescue fund to be set up this year.

European finance officials yesterday discussed a deal that Greece and its private creditors expect to complete in the coming days after bondholders signaled they would accept government demands for a bigger cut in their debt holdings.

‘Hard Default’

“They really have to find a way to let Greece down in a very orderly, organized, contained way,” said Weinberg. “If Greece has a hard default, that’s going to challenge institutional solvency to the max, and it’s going to give a preview of what would happen if there were bigger defaults or bigger sovereign meltdowns out there.”

Weinberg said he believes that hedge funds had acquired a “blocking position” in the negotiations and were “holding out to get a better deal for themselves to improve their own profits.”

The EU summit is “destined to fail because they are talking about the wrong things,” he said. “They don’t really have anything of traction to say about Greece.”

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