A nuanced view
Having recently come from and lived in America for the past 16 years, it is very obvious to me that the perception of the state of the European economy across the Atlantic needs an upgrade. Since 2008 we have witnessed riots, financial collapse and awful employment numbers in the so called “PIGS” Portugal, Ireland, Greece and Spain. However, we hear very little about the engine of the majority of GDP within Europe, namely the northern European countries: Germany, Holland, Denmark, Sweden, Finland…
I have now spent the past week in Austria and yesterday in Germany and have noticed the following nuances to the European economy. First, it appears to me that while the economy overall is sluggish as it is in America, the core of economic output remains intact. In fact, take a look at the public buses used in Austria below. Needless to say, I doubt bankruptcy will be declared here anytime soon. Riots? I don’t think so.
At the same time, there are daily demonstrations in Southern Europe as many local and some state governments are teetering on the brink of financial collapse(Rome, Italy below).
In fact, a recent referendum in wealthy Venice resulted in the majority of Venetians wanting to secede from Rome and form their own country within the EU. Clearly, the dividing line between rich and poor in Europe has been increasing but in terms of regions rather than within society as can be seen in America. The question then remains, how willing and able are the diverging economies to stick together and at what cost. The best clue to that answer is painted on a steel mill in Linz, Austria, below(I took that shot while driving by).
“There can be no Europe without the Euro (currency)”. While this slogan clearly makes sense for that particular entity, I believe that the majority of the core economies is in favor of keeping both the EU and the Euro in place. After all, the EU and the Euro are political projects rather than economic ones. Given the ability and the willingness to do so buys this continent time to sort out its structural economic difficulties. This room to breathe is reflected in the Euro as being the strongest major currency for many years now. Having said that, the fundamental structure of the Euro remains terminally flawed and will have to be addressed as you cannot have 18 Treasuries/sovereign bonds under one unified currency. Unfortunately, the future of that needed resolution is murky at best and will probably require another painful crisis to kick-start.