Is the EU in trouble?

myp · Feb 5, 2010

Just ran across this article on Reuters about the Euro debt crisis and the falling confidence in European assets due to it: http://www.reuters.com/article/idUSTRE6144KN20100205

Anyone have any predictions on where you see Europe and the EU headed economically?

Personally, I am not bullish on the EU and I haven't been so for a while. I just don't see a good long-term prospect for growth there considering the growing market regulation, escalating debt, and bigger governments. Might be some good short-term plays depending on what you are looking at though.

deanhills · Feb 5, 2010

myp said:
Just ran across this article on Reuters about the Euro debt crisis and the falling confidence in European assets due to it: http://www.reuters.com/article/idUSTRE6144KN20100205

Anyone have any predictions on where you see Europe and the EU headed economically?

Personally, I am not bullish on the EU and I haven't been so for a while. I just don't see a good long-term prospect for growth there considering the growing market regulation, escalating debt, and bigger governments. Might be some good short-term plays depending on what you are looking at though.

I've been waiting for this to happen. For me there is just too much bureacracy. Also, what goes up, has to come down too. A lot of the good stuff that happened, like companies being able to trade cross-border that much easier, has already been absorbed, in all probability people are waking up to how expensive all the Commissions are to run.

Dirk · Feb 5, 2010

The EU as a whole is a bit iffy right now, economically. The Euro has held up extremely well. Far better than i actually initially expected. West European countries like France and Germany, the economic powerhouses of the region, are out of recession and getting back on their feet. Germany, i expect, will be doing very well from now - it was one of the first out of recession and it has an export economy with a manufacturing base. Very stable. On the other hand, countries in the South like Italy and Greece aren't doing great. Greece probably more because it was teetering on civil war recently, though, which probably exacerbated things. Britain, the third biggest economy in the EU suffered badly because of what i call idiotonomics. In the long term, for the EU region, things look good, especially since Europarl is slimming down the bureacracy, we should see a little more free revenue.

Of course, the best thing would be if we could get out of the EU, ditch the Euro and go back to the Deutschmark, which i miss. The EU gives far too much power to the ECB - i don't want so much power in the hands of greedy capitalists. Getting out would also mean more revenue free for, i don't know, helping people? We should ditch the Euro because the Deutschmark had less value - we should go back to that.

Also, while i'm writing my wish-list, i wish we could be rid of Merkel and her CDU cronies - so that the trade unions are left alone!

deanhills · Feb 5, 2010

Dirk said:
The EU as a whole is a bit iffy right now, economically. The Euro has held up extremely well. Far better than i actually initially expected. West European countries like France and Germany, the economic powerhouses of the region, are out of recession and getting back on their feet. Germany, i expect, will be doing very well from now - it was one of the first out of recession and it has an export economy with a manufacturing base. Very stable. On the other hand, countries in the South like Italy and Greece aren't doing great. Greece probably more because it was teetering on civil war recently, though, which probably exacerbated things. Britain, the third biggest economy in the EU suffered badly because of what i call idiotonomics. In the long term, for the EU region, things look good, especially since Europarl is slimming down the bureacracy, we should see a little more free revenue.

Of course, the best thing would be if we could get out of the EU, ditch the Euro and go back to the Deutschmark, which i miss. The EU gives far too much power to the ECB - i don't want so much power in the hands of greedy capitalists. Getting out would also mean more revenue free for, i don't know, helping people? We should ditch the Euro because the Deutschmark had less value - we should go back to that.

Also, while i'm writing my wish-list, i wish we could be rid of Merkel and her CDU cronies - so that the trade unions are left alone!

"Get rid of" sounds almost like a Dirk slogan. Have to agree however, the European Union had it good while the going was good, and now that things are starting to pinch, and there is no spare cash, we are probably soon going to hear huge grumbles, and maybe countries threatening to withdraw. Germans were never happy with the fiscal "discipline" of the other Euro countries, they are probably more self-disciplined and willing to tighten belts than other countries who like to manufacture as much money as they can print.

Spontaneity · Apr 28, 2010

Greece could have been the card that crumbles the house. Portugal looks like its next in line followed by Spain and most likely others. The system is far from stable, so it is really no surprise. The critics have said it all along, but the the sense of prosperity, although false, was too much for the politicians to pass up.

Dirk · Apr 28, 2010

deanhills said:
"Get rid of" sounds almost like a Dirk slogan. Have to agree however, the European Union had it good while the going was good, and now that things are starting to pinch, and there is no spare cash, we are probably soon going to hear huge grumbles, and maybe countries threatening to withdraw. Germans were never happy with the fiscal "discipline" of the other Euro countries, they are probably more self-disciplined and willing to tighten belts than other countries who like to manufacture as much money as they can print.

D'aha! We don't like spending money!

On a serious note, some countries in the EU region will not do well. The obvious one is Greece. As i predicted back when this started, you'll remember. But as i said, France and Germany are well out of recession and back on track. I haven't really kept track of the others, but i suspect the EU as a whole will do very well, thank you very much. I'm an internationalist, but I don't like the European Union. As a socialist, i'm for localising democracy, not putting it on a more grand scale. All it does is take power out of the hands of the people.

deanhills · Apr 30, 2010

Dirk said:
D'aha! We don't like spending money!

On a serious note, some countries in the EU region will not do well. The obvious one is Greece. As i predicted back when this started, you'll remember. But as i said, France and Germany are well out of recession and back on track. I haven't really kept track of the others, but i suspect the EU as a whole will do very well, thank you very much. I'm an internationalist, but I don't like the European Union. As a socialist, i'm for localising democracy, not putting it on a more grand scale. All it does is take power out of the hands of the people.

Not only Greece, but also Portugal and Spain are in trouble. Going to be a very good test for the Euro, as who knows, maybe some of the countries may be forced to opt out. Whether they want to or not. Refer editorial by Krugman of the New York Times (29 Apr 10).

myp · Apr 30, 2010

As the debate over a rescue continues on, Greek bonds were downgraded to "junk" by Standard & Poor's earlier this week. Portugal and Spain government bonds were also downgraded.

deanhills · May 1, 2010

myp said:
As the debate over a rescue continues on, Greek bonds were downgraded to "junk" by Standard & Poor's earlier this week. Portugal and Spain government bonds were also downgraded.

Wow! I find it pretty amazing that they waited as long to downgrade the Greek bonds to "junk" status. Playing devil's advocate here, if one considers the enormous debt most of the countries in the world have, wonder how on earth one could get AAA ratings.

myp · May 1, 2010

deanhills said:
Wow! I find it pretty amazing that they waited as long to downgrade the Greek bonds to "junk" status. Playing devil's advocate here, if one considers the enormous debt most of the countries in the world have, wonder how on earth one could get AAA ratings.

Well there are many factors that play into what bond ratings are given by S&P, Moody's, etc.- kind of like with credit scores for individuals. When it comes to bond ratings, government bonds that investors see as low-risk (and hence have high confidence in them) tend to get better ratings since the country can virtually always sell them. The United States can probably leverage itself the most without losing its AAA at this point since so many countries use the USD as a reserve (although that is slowly starting to change now, which could mean trouble for the US in the future.)

PCKen · May 11, 2010

I heard of another billion dollar program for EU but it's outcome was lower than expected. This was the same day the US DOW was up 400 points when the program is implemented so they are trying solutions.

lorcan · May 12, 2010

I don't think it is in much trouble as all the European finance minsters came together and came up with 750 billion Euros, to help any European country what needs help, and also the European central bank is buying up government bonds to help the countries.

myp · May 12, 2010

lorcan said:
I don't think it is in much trouble as all the European finance minsters came together and came up with 750 billion Euros, to help any European country what needs help, and also the European central bank is buying up government bonds to help the countries.

Don't forget the large currency swap for Euros by the Fed. While these actions by the ECB and Fed may help increase confidence in the Euro for now, Spain, Portugal, Italy, and Greece still need to cut spending to improve their bond ratings or the EU and the Euro will find itself in an even worse position than it is currently in.

Calvin · May 14, 2010

lorcan said:
I don't think it is in much trouble as all the European finance minsters came together and came up with 750 billion Euros, to help any European country what needs help, and also the European central bank is buying up government bonds to help the countries.

I don't really understand why they feel a need to prevent Greece from going bankrupt. Supposedly it will start a chain reaction if they allow it to happen but I think, firstly, that is crap - there will be no chain reaction. Secondly, I think it would actually be in the best interests of the EU to let a few members go bankrupt, as that would reinforce a message to other EU countries not to be reckless with their spending. In business, not everyone survives. That is the natural order of things. I can't fathom why governments don't think the same is true for them.

el canadiano · May 14, 2010

Well that's why it's all perception. Also, investments have gone bot-based as of late, if you haven't noticed, so there are some things we can't control.

David · May 15, 2010

Calvin said:
I don't really understand why they feel a need to prevent Greece from going bankrupt. Supposedly it will start a chain reaction if they allow it to happen but I think, firstly, that is crap - there will be no chain reaction. Secondly, I think it would actually be in the best interests of the EU to let a few members go bankrupt, as that would reinforce a message to other EU countries not to be reckless with their spending. In business, not everyone survives. That is the natural order of things. I can't fathom why governments don't think the same is true for them.

So you don't see an issue with the oldest civilization in Europe going belly up?

Calvin · May 16, 2010

David said:
So you don't see an issue with the oldest civilization in Europe going belly up?

No, they can start over again. The issue isn't even Greece really, its the EU as a whole and too many weak links. Basically right now its just Germany and France propping the union up with funds. If they kick Greece, Turkey, and maybe one or two other non-fully developed countries out of the club, the remaining group will be stronger and in a better position to move forward.

Dirk · May 17, 2010

Calvin said:
No, they can start over again. The issue isn't even Greece really, its the EU as a whole and too many weak links. Basically right now its just Germany and France propping the union up with funds. If they kick Greece, Turkey, and maybe one or two other non-fully developed countries out of the club, the remaining group will be stronger and in a better position to move forward.

Turkey's not in the EU, yet. And I doubt they will be, for some time.

You are technically right, but it's not so easy to just change a currency!

Ratchet · May 24, 2010

I've always thought it was quite a mistake allowing the P.I.G.S into the EU. Those countries are far too economically unstable and are full of corrupt bureaucrats. I really hope this crisis can be averted, this will eventually affect the economies and then we'll be having another recession.

Andrew11 · May 25, 2010

Europe in major trouble, already 2 countries bailed out and the other economies are much weaker than usual. It is a big reason why the DOW has been plummeting lately.

Is the EU in trouble?

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