July 09, 2012

Global Growth Recession More Likely Than Full-Scale Global Recession According to BNY Mellon's Hoey


Need for European Social Compact Renegotiation; Redemption Fund Proposals Recall Alexander Hamilton Precedent for Legacy Debt - Virginia was the "Germany of its Day"

NEW YORK and LONDON, July 9, 2012 — Continuing to expect a global growth recession with global GDP to grow at 3%, BNY Mellon Chief Economist Richard Hoey expects that stronger countries in Europe may begin to exit the recession by later this year, while Southern Europe is likely to remain in recession throughout 2012 and most if not all of 2013.

"While some observers fear a full-scale global recession, we believe a global growth recession continues to be more likely, given the beneficial drop in energy prices and the easy monetary policy prevailing in most parts of the world except Southern Europe," Hoey says in his most recent Economic Update.

The weaker countries in the Eurozone face fundamental problems with eroded competitiveness and excessive debt, according to the report, facing a major task to become "credibly solvent" and thus lower their financing costs.  "Both the overall Eurozone social compact of the balance of contributions and responsibilities and the domestic social compact within many European countries need to be renegotiated," Hoey says. 

Hoey recalls a legacy debt precedent by citing Alexander Hamilton, who founded The Bank of New York in 1784.  Hamilton negotiated a compromise to successfully restructure the legacy state debts at a dinner table in 1790 with Thomas Jefferson and James Madison, two leaders from the financially strong state of Virginia, "the Germany of its day," writes Hoey. 

"The current proposals in Europe for a 'redemption fund' to deal with the excessive legacy debts in Europe have some resemblance to the successful efforts of Alexander Hamilton in 1790, 222 years ago," Hoey concludes.  "Such a redemption fund would not be the solution to the Eurozone problems any time soon.  However, if a new Eurozone social compact of contributions and responsibilities can be successfully renegotiated, it could make it financially credible." 

See http://www.bnymellon.com/foresight/update-video.html for Hoey's complete June 2012 Economic Update. 

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.3 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.6 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on Twitter@BNYMellon.

All information source BNY Mellon at March 31, 2012.  This press release is qualified for issuance in the UK and US and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management (US) and BNY Mellon Asset Management International Limited (ex-US) to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance.  The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements.  When you sell your investment you may get back less than you originally invested. Registered office of BNY Mellon Asset Management International Limited: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorized and regulated by the Financial Services Authority. A BNY Mellon Company