HSBC Holdings Plc Chief Executive Officer Stuart Gulliver said the euro region’s “stresses” are similar to those suffered by Malaysia, Thailand and Indonesia in the 1990s as they pegged their currencies to the U.S. dollar.
“Those economies suffered from an inappropriate, inflexible peg, which created capital inflows that were ultimately unsustainable,” Gulliver said in the text of a speech at a Fung Global Institute conference in Hong Kong released by the bank today. “The lessons of the Asian crisis, of building up excessive leverage and inflexible exchange rates, were not learned.”
About $4 trillion has been wiped off the value of global stock markets this month amid the euro region’s debt crisis. The European Commission yesterday challenged Germany’s remedies to the financial crisis, calling for direct aid for troubled banks, while an opinion poll showed most Greeks want to see the terms of a financial rescue revised.
Four steps should be taken to ensure the euro region remains intact, said Gulliver. These include, a Europe-wide deposit insurance plan provided by the European Banking Authority and a program to purchase bad assets in a manner similar to the U.S.’s Troubled Asset Relief Program, led by the European Financial Stability Facility. A plan toward fiscal union and a euro bond to refinance weaker countries are also needed, Gulliver said.
-- Editors: Jon Menon, Steve Bailey