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Friday, October 14, 2011


The European Union is large.  Both the International Monetary Fund and our CIA rank them as #1 in size of Gross National Product, to #2 USA and #3 China.  The World Bank has the USA as #1 and something called Eurozone as #2.  The population of the EU is just under 500 million, while that of the U.S. is 310 million.  China has more than 1.3 billion people.  The U.S. is just a bit larger in area than China, but both are more than twice the size of the EU.

There are 27 member states, but not Switzerland, with nine others seeking entry, including Turkey, Serbia and Iceland.  There is an elected Parliament of around 750 (number keeps increasing) members.  This gets confusing, but there is the President of the European Council, Herman Van Rompuy to the left, and Commission President Jose Manuel Barroso to the right.

I like the EU because you can travel from the Netherlands to Stockholm to London, and this is like going from Los Angeles to Chicago to DC.  No immigration/customs, and, same Euro...well, maybe not.  While the Netherlands does use the Euro, Sweden has the kroner and London the pound.  This is part of the problem, for ten countries have their own money.  The other bigger one is that they are an economic basket case.

We know about Greece.  They have a debt to GDP ratio of 150%, not as bad as Japan at 200%, but worse than the USA at around 62%.  The difference is that Greece is so risky, they need to borrow at 6%/year, while Japan's is less than 1% and USA at 3%.  As long as inflation is controlled, all is well for the USA.  Greece, though, was already "given" a trillion dollars last year, and has very little hope, even if they are bailed out again.  While on the surface it seems tempting to let them go bankrupt and kick them out of the EU, the reality is that banks in Germany, France, and, even the U.S., could go down with Greece if the worse happens.

Of course, they are not alone.  The losers are known by their acronym, PIIGS, or Portugal, Ireland, Italy Greece and Spain.  Spain, incidentally, has an unemployment rate greater than 20%.  Carsten Brzeski said it best:

"It's not (going to be) a big-bang happy ending, it's not an American movie with a nice punch line at the end," Brzeski says. "This is probably kind of a European art movie, with a lot of suffering but in the end a rather gentle, happy ending."

That could well be an overly optimistic statement.  While the general sentiment is that the European Union will not disintegrate, all is not well and getting worse.

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