(Bloomberg) — The decline in oil will be positive for the European economy, though banks may be under pressure if the low prices persist, said David Rubenstein, co-founder of Carlyle Group LP.
“Europe is a gigantic consumer of oil and therefore it’s a tax cut,” Rubenstein said today in an interview with Bloomberg Television’s Erik Schatzker and Stephanie Ruhle at the World Economic Forum in Davos. “Europe has to take advantage of it. If the price of oil stays very low and Russia is hurt and the Russian companies, which had borrowed so much from the European banks, can’t service that debt, that would be a problem for European banks.”
Rubenstein, 65, said European banks would come under pressure only if Russia chooses not to use central reserves to help prop up the nation’s energy producers. The European Central Bank Executive Board has proposed quantitative easing of 50 billion euros ($58 billion) a month until the end of 2016, two euro-area central-bank officials said today. The proposal reflects the ECB’s determination to stave off the threat of deflation in the 19-nation economy.
“You’ve got a lot of problems with economic growth in Europe,” John Studzinski, a Blackstone Group LP partner, said in a separate Bloomberg TV interview today in Davos. “Deflation. Youth unemployment remains high. You probably have five to seven issues that are all going to have an exponential impact on each other to create a very unstable Europe.”
Global investors will have an opportunity to invest in distressed debt, Rubenstein said, as low oil prices hurt producers.
Washington-based Carlyle, the second-biggest alternative-asset manager, is experiencing declines in its energy portfolio while also seeking to deploy some of its $7 billion dedicated to investing in energy companies and assets.
“Energy distressed debt will probably be an attractive area because some people who borrowed too much may not be able to pay back the debt on the terms that they thought they would be able to,” Rubenstein said.
The billionaire, who co-founded Carlyle in 1987, said oil prices have “probably touched bottom for a while.” Brent crude has slid 57 percent to $49.55 a barrel from June 19, its peak last year.