Skip to main content

O'Neill: U.S. 'cuckoos' bigger worry than EU

By Kevin Voigt, CNN
updated 3:25 PM EST, Fri November 9, 2012
  • Jim O'Neill: The U.S. fiscal cliff now a greater market concern than the eurozone crisis
  • Situation in Washington risky "because we're not sure which way the politics are going to go"
  • While eurozone debt crisis continues, markets appear more confident the euro will hold
  • "When the markets press them ... these guys are going to do things to keep the euro alive"

Editor's note:

(CNN) -- Despite the long, drawn-out debt dilemma in the eurozone, the looming fiscal cliff in the U.S. is now the top concern of Goldman Sachs' Jim O'Neill.

"I think the U.S. thing is now something I regard more as a risk because we're not sure which way the politics are going to go," O'Neill, chairman of Goldman Sachs Asset Management, told CNN's John Defterios Thursday. "The markets have obviously latched onto post election is everything to do with fiscal policy and gridlock in Congress."

With the complexion of the post-election government -- the White House and U.S. Senate controlled by Democrats and the U.S. House controlled by the Republican Party -- there is investor fear of a stalemate as Washington faces a December 31 deadline before hundreds of billions in automatic spending cuts and tax increases kick in. Analysts have warned inaction could wipe 3-4% of GDP from the U.S. economy, sending it into recession.

What's in the fiscal cliff?

Pres. Obama and the economy, round 2
Back to business for Obama
Fiscal cliff awaits Obama and the world

"I think in order to have a deal we need to have a president that's focused on his legacy rather than his own personal politics and a Republican party that comes out of 'cloud cuckoo land' and into reality, because that is what is needed to force a deal," O'Neill said. After the loss of challenger Mitt Romney Tuesday, the Republican Party is embarking on a period of soul searching — a process that will seek to answer whether conservatives have gained too much influence within the party apparatus

The anatomy of Romney's defeat

While the eurozone woes still look grim, investors appear to have been assuaged by the continued efforts there, keeping yields on borrowing costs from returning to crisis levels seen this summer.

"The European mess has been a mess for so long -- famous last words, but I sort of know these guys are going to continue to sort of muddle through at least until the German election," O'Neill said.

"I don't have a huge amount of hope for a massive recovery of the European economy next year. But I think we've seen enough that when the markets press them and test them, these guys are going to do things to keep the euro alive," he said.

"You look at the Greek vote last night -- very hard for European policy makers to eject Greece out of the eurozone in the foreseeable future. All of that is a sort of it, I'd call it a relatively stable albeit a rather dull and negative story."

Part of complete coverage on
updated 3:43 PM EDT, Tue August 27, 2013
German Finance Minister Wolfgang Schaeuble says the eurozone's problems are not solved, but "we are in a much better shape than we used to be some years ago."
updated 11:28 AM EDT, Wed September 4, 2013
The G20 is held in Russia but, amid disagreements over Syria, can anything be done? John Defterios investigates.
updated 11:02 AM EDT, Wed July 10, 2013
Summer could not have come soon enough for Lloret de Mar, a tourist resort north of Barcelona. Despite the country's troubles, it's partying.
updated 1:50 PM EDT, Fri June 7, 2013
The euro club has suffered major shockwaves but its newest member has emerged as an economic star. What;s behind Estonia's success?
updated 9:23 AM EDT, Wed May 29, 2013
The global recovery has two speeds: That of the stimulus-fed U.S. and that of the austerity-starved eurozone, according to a new report.
updated 9:26 AM EDT, Tue May 14, 2013
The flags of the countries which make up the European Union, outside the European Parliament in Strasbourg, France.
The "rich man's club" of Europe faces economic decay as it struggles to absorb Europe's "poor people", according to economic experts.
updated 10:56 PM EDT, Sun May 26, 2013
Europe's competitiveness is threatened as manufacturing companies scrambling to find enough skilled engineers.
updated 11:02 AM EDT, Wed July 10, 2013
Spain's economic crisis is in its sixth straight year yet tourism, worth 11% of GDP, is holding its own, one of the few bright spots on a bleak horizon.
updated 6:44 AM EDT, Thu May 2, 2013
As European financial markets close for the spring celebration of May Day, protesters across Europe and beyond have taken to the streets to demonstrate.
updated 8:10 AM EDT, Fri April 26, 2013
As Croatia prepares to enter the 27-nation European Union, the country's Prime Minister says Italy must return to being the "powerhouse of Europe."
updated 12:56 PM EDT, Thu April 25, 2013
Spain's unemployment rate rose to a record high of 27.2% in the first quarter of 2013, the Spanish National Institute of Statistics said Thursday.
updated 9:55 AM EDT, Mon March 25, 2013
The financial uncertainty in Cyprus is generating images of long lines at ATM machines and anti-European Union protests.
updated 2:15 PM EDT, Mon March 25, 2013
Cyprus will "step up efforts in areas of fiscal consolidation." Where have we heard that before? Oh yes. Greece.
updated 9:39 PM EDT, Fri March 22, 2013
The Cyprus debt crisis is being felt by the banks but also by the people who work at them. Nick Paton Walsh reports.
updated 8:10 PM EDT, Thu March 21, 2013
CNN's Nick Paton Walsh reports on a Russian hotel maid caught up in Cyprus' financial crisis.
updated 12:08 PM EDT, Mon March 18, 2013
Never underestimate the capacity of the Eurozone to shoot itself in both feet, says CNN's Richard Quest.
updated 11:03 AM EST, Thu February 21, 2013
Spain has seen hundreds of protests since the "Indignados" movement erupted in 2011, marches and sit-ins are now common sights in the capital.