owl975 said Some countries in the EU may be rough water, but its expected considering the EU and the Euro is relatively new. Considering how strong the Euro is, I doubt the region will be in a slump for too long.
Sorry but your statement is ill informed.
The strength of the Euro is not representative of healthy underlying economic fundamentals (and conversely neither is the weakness of the dollar the oft-mentioned poor underlying economic fundamentals. If national debt where the measure of economic strength then Europe would be in far worse shape than America (and it is from that point of view).
The strength of the Euro is an enormous hindrance to the European export economy and has had seriously deleterious effects on the economic fortunes of Italy, Germany, France, Spain, Portugal, Sweden, and now Great Britain.
Most exporting companies are relatively small (especially in countries like Italy) and they are particularly hard hit by the combination of the strong Euro, the weak dollar, and non-existent capital financing.
ECB policy has kept interest rates low and liquidity lower in a futile attempt to stem inflation. Inflation has passed 4% in Great Britain and the situation is far worse on the continent (where the figures are often fudged but people on the street will tell you that the "Euro effect" has made everything more expensive.
Furthermore, the mortgage problems that have plagued America are very present in Europe. Exactly whom do you think was buying all of those mortgage backed securities that Wall Street was so eagerly packaging? Could it have been Europeans who saw these vehicles as a.) asset backed and therefore less risky b.) relatively cheap because of the weak dollar.
Do we really think that a mid-level trader at Societé Generale was able to vaporize billions without anyone ever noticing? Could this be a case of the French saving face?
In Italy operai (workers) who earn euro 1,000 a month and have a houshold income of perhaps 3,000 euros (with three-or-four people working) have taken out mortgages and second mortgages on first and second properties. Those people now find themselves with monthly payments of 2000 euros and cars, credit cards, cellphones, etc. on top. Food prices are skyrocketing, gasoline is through the roof, and so forth. That train cannot stay on the tracks.
My housekeepers husband (a man who has worked for the same company for more than 30 years - and who is 3 years from retirement) is now being asked to sit at home because there are no orders for the companies product. Can you imagine how he must feel?
Sorry, but unraveling this mess is going to take at least a decade. Moreover, a functional Europe will depend, eventually, on one of two possibilities. a.) Either some mechanism will have to be found to avoid an ECB policy that is controlled by Germany, France, and Great Britain b.) or/and there will have to be some kind of decoupling of bank policy until (and if) relatively parity is reached between northern and southern European economies.
At the minute, the old addage that says "when America's economy catches a cold, the rest of the world gets the flu" has never been more germane.
Terry
