Lombard Odier has added its voice to those wealth management firms which doubt the ability of the latest European Union package to stave off a full-blown debt crisis in the eurozone.

The lack of specific details, particularly concerning the expansion of the European Financial Stability Facility, and rhetoric from policymakers pledging to take all necessary steps, will not stabilise government debt ratios, cut banking leverage or significantly cut Greece’s debt burden, the Swiss firm said.

The firm’s comments add to those of institutions such as Schroders, the UK-listed investment house and wealth manager, that have raised doubts about the deliverability of any EU debt restructuring plan.

On 26 October, EU leaders agreed to a deal increasing the size of the EFSF to €1 trillion (around $1.38 trillion) and apply a 50 per cent haircut to Greek debt while increasing bank capital by around €110 billion.

The recent collapse of Franco-Belgian bank Dexia, which collapsed a few weeks ago and required a government rescue, demonstrates that bank capital structures carry too much debt and inadequate tangible common equity, Lombard Odier said in a regular note on economic issues. It pointed out that Dexia had a core Tier 1 capital ratio above a 9 per cent floor, but still collapsed. This is because, Lombard Odier said, there was only €7 billion of tangible common equity supporting almost €570 billion of tangible assets – equating to a leverage of 50 times on the capital at risk.

“The latest [EU] proposals continue to focus on questionable measures of bank solvency, continue to leave taxpayers in the bank capital structure and will do next to nothing to reduce eurozone bank leverage from 26 times tangible common equity down to a more reasonable, in our view, level around 15 times. If a core Tier 1 ratio above 10 per cent didn’t save Dexia, why should anyone have any confidence that a ratio above 9 per cent will save any other bank?” said Lombard Odier.

It added that the 50 per cent Greek debt haircut “is far less than meets the eye” At the end of July, there was €370 billion of Greek debt,of which around 30 per cent was held domestically by banks, insurance companies and pension funds; approximately one-third was held by official institutions such as eurozone governments and almost 40 per cent by foreign investors.

Since that share held by official institutions will be paid in full, this debt is excluded from the haircut, Lombard Odier said.

“That leaves the share held domestically and by private foreign agents subject to the haircut: the losses incurred domestically will necessitate additional government support for pension funds and the banks and, so, there is next to no benefit accruing from those losses,” the note said.

“Since it is clear that debt-burdened economies cannot cut themselves to prosperity, since private demand cannot increase to offset falling public demand, and they have insufficient growth potential to grow out of the mess, the only solution remains substantial and widespread debt restructuring. Investors must ask themselves: will these measures make eurozone grow faster? Will these measures stabilise or reduce debt ratios? Will these measures make banks stronger? Or, are they more of the same, sticking plasters on gaping wounds? If the answer is no to the former and yes to the latter, as we believe, there are grounds to remain cautious for the time being,” the note added.