Strategists See “Darker Scenario,” Euro “Endgame” Approaching

A growing number of Wall Street economists and market strategists are predicting dire outcomes for the euro zone as policymakers have yet to develop a credible plan to effectively tackle the escalating sovereign debt crisis.

According to a Bloomberg report, “Remedies previously rejected by policy makers as unpalatable and now increasingly called necessary by economists include the ECB ramping up bond buying and governments issuing common securities in a deeper fiscal union. The debate is prompting banks including UBS and Bank of America Merrill Lynch to begin outlining the likely fallout of a euro-area collapse.”

Mansoor Mohi-uddin, UBS head of foreign exchange strategy in Singapore, stated that “Markets continue to move faster than politicians” and that investors are beginning to “price in the endgame” for the euro.

The report also cited comments from Morgan Stanley’s chief economist, Joachim Fels, who wrote in a recent note to clients that “Failure to come up with a comprehensive solution on Dec. 9 is certainly possible, and we believe that it would open up a much darker scenario that, eventually, could entail a breakup of the euro.”

“Stricter budget rules are needed if the ECB is to play its ‘full role’ and help troubled countries, French Budget Minister Valerie Pecresse said yesterday,” the report noted. “Germany today spurned calls to maximise financial firepower, saying its fast track proposals for EU treaty change are key to stopping the rot.”