Felix Zulauf: Euro heads for break-up

Felix Zulauf, founder of Switzerland's Zulauf Asset Management, predicted trouble in 2008. Early last year he also forecast an equities rally spurred by central-bank action. So what does he see happening next? The rally is getting long in the tooth, he tells Barron's. It seems likely to peter out by the end of the summer when the problems accompanying the multi-year, post-bubble deleveraging process will "be back on the table".

American growth looks set to disappoint; the US faces "more fiscal drag" than other countries in 2013, and consumer income is growing slowly. Then there's the ongoing euro crisis. Because the struggling peripheral states can't boost exports by letting their currencies fall, they can't grow, and austerity imposed by policymakers will eventually spur a revolt.

"You can send people into poverty for a while, but there is a limit." With a rapid move to political and fiscal union unlikely, the odds are that, in the long term, "some countries could break out of the euro and devalue their currencies".

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Meanwhile, with France's economy looking increasingly uncompetitive, "there is a good chance that France will be the next problem". Another worry is a currency war.

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