Emma Wall: Hello and welcome to the Morningstar TV series, Why should I invest with you? I’m Emma Wall. I'm here with Dean Tenerelli of the T. Rowe Price European Equity Fund. Hello, Dean.
Dean Tenerelli: Good morning, Emma. Thanks for having me.
Wall: So, the Eurozone has dropped off the news agenda somewhat compared to last year. Is this because we're all bored of hearing about it, or have the improvements been made?
Tenerelli: I think there definitely have been improvements made. I think the political agenda is sort of progressing at a slower pace without the news headlines and the politicians are left to move forward. I think the German election has sort of kept things a bit quite. For now Germany needs to appease its own voters, but then we'll continue with political reform.
Meanwhile, all of the reforms that have been put into place in Southern Europe, especially in Spain and also in Ireland, continue and you continue to see the economic benefits of it in the country’s macro statistics, such as a very positive current account now in Spain, which didn't exist several years ago. So, we're seeing the benefits of what the hard work that have been done in the past feeding through now to the real economy.
Wall: After um-ing and ah-ing about whether they were going to withdraw QE, we found out this week that the Fed is not going to do so. It has an impact on global markets. What impact it is on Eurozone markets?
Tenerelli: It has an impact on global markets, I think mostly in the short term. The reality of life is that rates are going up and they're going up for a good reason, which is that the economy is recovering and warrants higher interest rates and the stimulus needs to end, because we can't be leaving off of stimulus indefinitely. So I think it's a good thing that the Fed eventually tapers. Markets typically will get wobbly at the beginning of a recovery because of rate rises, but rising rates and rising markets can coincide quite comfortably and have done through every business cycle. So, I think short-term worry not particularly concern myself; let's hope for the recovery to continue.
Wall: If that’s not a concern, then what are you concerned about in the Eurozone and what are the challenges in the Eurozone?
Tenerelli: There are still great political challenges, integration challenges, things like homogenizing banking rules with regard to regulation, with regard to provisioning methodologies, common central bank. So, that's one great example of a lot of work that's yet to be ahead of and the yet to be agreed on. So, the political agenda and what we've learned from this crisis is that we need to have more integration and now it's a political reality of having to get on with that. So, I think that's still the biggest challenge ahead of us and to push for continued liberalization, relaxation of labor laws, rigidities in the economy, to get the economy strong and competitive globally. I think they're the biggest challenges.
Wall: But things are moving in the right direction?
Tenerelli: Things are moving in the right direction slowly and steadily and not without debate, as always in Europe. But the end result, I think what makes me optimistic is that we're seeing the end result already improving in economy such as Spain, where competitiveness has been gained, wage costs have gone down, current account has gone into surplus, and the Eurozone in general has the highest current account surplus that it’s had in years. So, all pointing to strong competitiveness and a strong economy actually. So that's what gives me hope and optimism for the future.
Wall: Dean, thank you very much.
Tenerelli: Thank you.
Wall: This is Emma Wall for Morningstar TV. Thank you for watching.
