This weekend saw the election of French president Francois Hollande who has promised to renegotiate the fisc
al compact between the EU's 27 leaders aimed at enforcing budget discipline within the bloc, while anti-austerity parties polled well in inconclusive elections in Greece.
But Prada told PLANSPONSOR Europe that unpicking the fiscal compact may be easier said than done.
“We will see if these socialists are really "anti-austerity". The socialists also governed in Spain before the last elections, and at the end of their mandate, they were totally pro-austerity (because the EU, ECB and so forth, said so). So it remains to be seen if Hollande is really anti-austerity. The European institutions have a lot of power, even if Europe looks politically broken. Hollande might have said he is anti-austerity, but, like I said, it remains to be seen. The European institutions might not let him.
“We are adopting this austerity measures all over Europe, and what we are really getting is this anti-growth policy everywhere (Ireland, Spain, Italy, Greece.... everywhere). So I think it will take time (precious time!) but we will end up having anti-austerity measures all over Europe, regardless of who is in power at the government but not near-term. I am afraid it will take longer for the politics to realise this.”
Such austerity has led firms such as Dutch pension delivery organisation APG to seek investments in Asia and the Far-East. APG recently announced it is to invest Rs 650 crore (circa €92.4m) to take a 6% stake in Indian hotel chain Lemon Tree Hotels as well as agreeing to help build 35 hotels in the country in four years.
Commenting on the deal, Sachin Doshi, Senior Portfolio Manager for APG said: “We see significant room for growth in the supply constrained mid-scale hotel segment in India. With one of the world's fastest growing economies, strong domestic consumption, rapid urbanisation and young demographics, India presents an attractive long term investment opportunity for us.”
But Prada adds that despite austerity measures being implemented across Europe, investment opportunities do remain. “It really looks like you have to go outside Europe for growth, but if you "dig" a little you find that in Europe there are a lot of excellent managed companies that are making a lot of money. Take Spain, for example. The Ibex is down 20% (approx) but you have companies like Grifols (up 49%), Amadeus (up 23%) and the same can be said of companies in France, Germany, Italy, etc. So, you do have growth in Europe, you just have to look a bit harder to find it.”
“Europe is not going to disappear (I am not talking about the euro, I am talking about the continent). We have been around for the past 3,000 years, and we will still be here for the next 200 at least! We might have different economies, different languages, different currencies, but we will be around and some companies will still make money.”