European investors are cautiously optimistic about a resolution to the eurozone crisis, Fitch Ratings reports.
The rating agency says that its latest quarterly survey of investors found that the majority believe that recent policy announcements represent major positive steps toward a resolution of the crisis. Fitch reports that 86% of investors said policy announcements, such as the European Central Bank's commitment to buy sovereign bonds, and plans for a banking union, are major positive steps towards resolving the crisis.
However, a solution is far from certain, it cautions. Indeed, it says, 81% of respondents acknowledge that significant economic, financial and political risks to resolution remain.
Fitch says that it agrees that these recent policy moves are positive steps that reduce the risk of a self-fulfilling liquidity crisis, or even a solvency crisis, derailing vulnerable sovereigns. However, it also notes that there was limited progress towards banking union at the October EU Summit. And, it says, "Lack of momentum could damage the credibility of policy makers' efforts to solve the eurozone crisis and increase the eurozone's vulnerability to market pressure."
To boost their credibility, policymakers must deliver on their self-professed goal of a "specific and time-bound roadmap" for a "genuine" union at their December summit, Fitch says.
Moreover, while the vast majority of investors see positive signs, Fitch notes that the remaining 14% of European investors were more pessimistic, saying that the policy announcements will have little impact. They expect market pressure will soon mount again on Spain and Italy, it says.
The survey was conducted between October 2 and November 6 and represents the views of managers of an estimated US$7.4 trillion of fixed-income assets.