Forget the US, Europe’s in a mess

Several years ago, at the height of the thermonuclear phase of the Global Financial Crisis (compared to the slow radiation death we’re experiencing at the moment) a colleague of mine poured scorn on the US as an economy and looked towards the mighty powerhouse of Europe as an example of How To Do Things Right.

So it turns out he was wrong.

Some of the individual underlying economies are in good shape. There is much to be said for Germany’s productivity levels, technology, social safety nets, strong exports, apprenticeship system and more. The house market / debt problems of the south are less obviously good.

The real problem is with the Euro. A single currency in an area more inclusive than theory would suggest as ideal for a common monetary area AND without fiscal union is proving to be very unstable.

I’m not quite ready to make a prediction that the Euro won’t survive, but I’m looking to that as a real possibility. Just take a look at the Germany-Italy spreads to get an idea of how nervous the market is.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.