With no workable solutions in sight and a sovereign debt crisis only likely to get worse, the European Union is likely to see an ultimate breakup, widely followed hedge fund executive Kyle Bass told CNBC.
Bass, the managing partner at Hayman Capital Management famous for making huge sums from the collapse of the subprime mortgage industry, said last week's EU summitproduced "a blank piece of paper" on which "there are no details," causing him to conclude, "It won't work."
"They're going to have to restructure a lot of their debt. Eventually the (European Monetary Union) is going to have to break up," he said. "The adjustment mechanism that these countries need is a much weaker currency. It's very difficult to go through a hard restructuring and become competitive once again as a nation unless you have a currency adjustment mechanism that's associated with your restructuring."
Under current EMU rules, individual countries cannot devalue their currencies because they are all tied to the euro.
As such, heavily indebted nations such as Greece cannot get out of their sovereigndebt predicament while their currency remains at still-elevated values, though the euro has dropped off significantly against the dollar this week. A currency devaluation, done through central bank money printing, would help cheapen the value of the debt.
Page 1 of 2 | Next Page