Europe - beyond the Greek crisis

The Greek crisis has hit the front-pages of newspapers across the globe, and every economist and strategist around the world is coming out with his/her own interpretation of the problem, along with a prediction of what this may lead to.

Being neither an economist nor a strategist, and viewing from a common man’s vision, it seems to me that the Greek crisis is just a tip of the iceberg, which is poised to maul not just the land of Socrates and Plato, but the whole of Europe.

The whole world is by now aware of what is happening inside Europe – an internal imbalance and unrest caused by ailing economies (yes, you read it right!!), differences in opinion by different governments on the economic front, erratic and uneven growth posted by the different member-nations – all this coupled with a dismal rate of recovery from the slowdown that hit the world in 2008.

When the Euro was introduced in 1999, it was hoped that these uneven growth patterns would gradually blur out, and the combined entity would be able to compete the United States on the global front. But the founding fathers of the EU have forgotten that the diversity among the different states and people in the USA is its biggest strength, whilst the same diversity among the different member states and people in the EU is its biggest Achilles heel (if you know what I mean). And the increasing divergence among the nations is testimony to the fact that some nations feel they were much better off before joining the EU than they are now.

I guess this is the reason why the support for the Euro, the common currency, has been weakening from many quarters. The ECB’s biggest headache in the past few years has been trying to maintain an interest rate that is satisfactory to all. Countries like Spain and Italy want it kept low, while stronger economies like Germany and Netherlands are already complaining at the low rates, which is detrimental to their interests. Apparently the EU’s famous policy of “one size fits all” seems to have fit no one.

Germany in particular, has been very stubborn on this issue, as its most lucrative cash-cow, the automobile industry, is yet to benefit from the ECB’s interest-rate policy. To add to this are its internal taxation problems, where the Social democrats and the Christian democrats tasted subtle success in easing pressure from within the political system. I half think than a German economic fall is likely to happen sooner than a Greek fall. (lol)

Another burning issue is Turkey. Of late there have been rumours of allowing Turkey into the EU membership. There were, as expected, more objections than consents, from within the EU, on the grounds that Turkey, being culturally and socially different (read Islamic) would not fit into the EU’s image. But the tables are turning now. Long hailed as the “sick man of Europe” (until the sobriquet was given to Italy in the recent past, thanks to the Silver man (J), Turkey today seems more promising than most other EU nations. All MNC’s across the world are quarelling for floor space in Ankara or Istanbul. In fact, today Turkey’s membership was to happen, it would have to be the EU that went and requested for Turkey’s inclusion, and not the other way round, for Turkey’s membership would boost EU’s economic position tremendously.

Representing just about 8% of the world’s population, the EU is not the first choice of investment for many global firms. China and India put together represent about 37%, and this coupled with the fact that these countries are also some of the fastest growing economies, is magnetizing all investments into these 2 nations. Other regions like Latin America and Africa are also pretty promising, which means that the foreign investment scenario in future looks very bleak for the EU. With the run-up to the elections for a new president of the EU in 2011, the world is warming its palms in glee, and awaiting more fireworks and drama.

MK

Labels: Cashonova