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Don’t allow European countries to go bust, warns bank CEO

(SHARECAST) – European economies should not be allowed to go bust, the chief executive of US bank JP Morgan Chase has told an Italian newspaper.

Any failure would start a chain reaction and heap more misery on the struggling eurozone, Jamie Dimon said in an interview with Il Sole 24 Ore.

“We do not believe that is the right policy,” he said. “If an EU member goes bankrupt and makes a stop payment, Europe will have to save the banks and to hold government bonds”.

Meanwhile, the Institute of International Finance has called plans for a European mechanism to share the burden of any future bailouts with the private sector a “step in the right direction”.

Eurozone finance chiefs decided recently to include a collective action clause (CAC) within all sovereign bonds issued from 2013, meaning just a small percentage of creditors would have to back a country’s debt restructuring for it to go ahead.

“Collective action clauses are very positive, given their history,” IIF board member and Citigroup chairman William Rhodes said.

Germany is a big fan of so-called haircuts on the value of bonds.

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