The investment expert acknowledges that those who live in Spain and Italy will continue to suffer at the hands of austerity and unemployment, but thinks worries over an all-out default in Europe have finally disappeared. "The euro debt crisis is over, although the governance and unemployment/growth crisis has many years left to run," he said.
"If you are Spanish and unemployed, the difference between the two is largely semantic. However, for global equity investors there is a huge difference between the two."
"A debt crisis has the potential to undermine growth and financial markets around the world, while a governance and unemployment/crisis is more of a local problem with implications only for local economies and markets."
Watson says that a number of positive developments have significantly reduced the risk of a eurozone collapse.
"Most importantly, the ECB has signaled it will play a greater role, offering to buy in unlimited quantity short-dated bonds issued by countries formally requesting support and being subject to an agreed reform programme as a result."
"This backstop is a formidable one and should ensure countries have few problems funding themselves."
"Second, the mood in Berlin has changed, with leaders now seemingly committed to keeping the eurozone intact with the existing membership."
"Finally, there have been further positive steps taken within the peripheral economies – including Greece – to improve their finances."
"These three developments have helped move the crisis away from being a debt crisis to being a governance and unemployment/growth one," he explained.
Watson believes concerns over European debt levels have been overplayed anyway – particularly compared with more “stable” countries such as the US.
"In many ways the problems in the eurozone have always been about governance and unemployment/growth rather than debt," he continued. "The deficit in the eurozone is and has been lower than in the US for some time."
"Somewhat remarkably, the deficit as a percentage of GDP in the US has been higher than the GDP-weighted deficit in the problem economies of Greece, Ireland, Italy, Portugal and Spain every year for the last 10 years."
While Watson thinks growth is likely to remain weak or negative for many years in the problem economies, and unemployment may not return to normal levels for over a decade, he says markets have more than priced in these factors.
"I don’t think these challenges should be an obstacle to global stock markets, which remain cheap, under-invested and likely to be supported by loose monetary policy for years to come," he finished.