Eurozone scenarios

from bloomberg businessweek mag

I'm not a historian, nor well-versed on government, i.e. Federation v. Confederation, but isn't the EU constructed in much a way that the U.S. would have been had the Confederate's ideals "won"? Yes, that is egocentrism, and hypothetical. All states share certain economic traits and connections, common law as well, but they are all, ultimately, independent. They are controlled in the largest sense by their own "state" governments.

Seeing the United States of Europe is pretty much declaring what the Civil War did in the U.S., absolute power is Washington, what it says is what goes. This worked in the U.S., kinda , though there is a huge disconnect, which has always been true... getting more blatant with communication advances. Somehow though, I don't think it would in Europe.

Would Europeans have a bigger issue having a "Federation", where your taxes FIRST go to your equivalent of EU capital, and then to your state's capital?

As I understand the differences between union government and confederate government--there are none. The differences between both sides were ideals surrounding slavery, and how the agricultural south was subservient to the industrial north.

The EU as it stands is more like the articles of confederation (http://en.wikipedia.org/wiki/Articles_of_Confederation) the main drawback is it required absolute unanimous agreement for any law/measure etc to be passed. The problem was this was incredibly slow, thus the revisions which now makes up the constitution.

The US's government structure is presumably straightforward:

 

1. Federal government handles any inter-state matters as well as inter-national matters
2. State government handles any intra-state matters.

<rant>

To apply this to the EU would be problematic I think due to some of the pride some europeans hold for their mother/fatherland. By combining the member countries into one 'superunion' would dissolve the unique individual identities of member nation-states.

Within America for example, there are 7 distinct social groups all of whom identify themselves differently when asked to compare, but when you ask any of these groups if they are American, they will all respond yes. You could make the argument that this is a dual-identity. There are classifications within a country but at least every citizen identifies with the country as a whole.


</rant>

I believe each nation must have separate country.
EU is like a big collective farm but everybody cares only about own stuff.

European confederation would never work. The cultural differencies between countries and nations are too big, especially if you compare Southern Europe to Northern Europe.
How could any Northern European nation accept Greece whose economy and politics have been based on cheating only?

I agree with Indrek but for me the main issue is the 23 official languages they will even if it's juste a the start it couldn't work .

I agree to the cultural huge differences but... could you really tell which country's economy and politics aren't based on make believe?

Still hunting.

Thats interesting. Do you have any more info on these social groups?

http://petewarden.typepad.com/search...up-the-us.html

As defined by facebook, which IMO is the most accurate measure.

http://petewarden.typepad.com/.a/6a0...aaf6970b-800wi

Indeed it is interesting. Thanks for the info.

Stay at homia

Christ that name took a lot of thought.

not as much as Jesus Land did tho

http://en.wikipedia.org/wiki/Jesusland_map

Ronald Raygun,
thanks for the info.
First time ive heard of this.

benssol,
thank you for opening the thread.
interesting posts.

Cheating only? Northern Europeans don't cheat? Get real. Iceland is bankrupt. Sweden faced the same debt problem Greece does now in the 1990s. Britain has worse debt than Greece does now. Germans were pushing truckloads of their worthless cash in the 1930s.

In my last statment is the answer to a country's debt woes - get back your own currency so you can devalue it and deal with such crises.

The euro was a sucker punch for the smaller euro countries like Greece to buy products they didn't really need from larger manufacturing countries like Germany and France. Greece was allowed to borrow on the proviso she purchased products from Germany and co. IOW, the northerners sought to enslave Greece. Throw in corrupt politicians north and south and it looks like they're going to be even bigger debt slaves. Unless they rise up to the occasion and deal with these criminals.

Iceland is in Europe but isn't in the european union ,and for the Sweden and the Britain they still have their own currency so their action didn't impact the other country .
And by Cheating i think Indrek was speaking about the fact that Goldman Sachs helped the Greek to mask a part of their debt .

If Greece would be honest about its economy then it never passed to the Euro zone. Never!
So, the cheating was intentional, i.e. criminal.

Profiting From a Euro Breakup


When the Euro celebrated its 10th anniversary last year, it seemed to be a solid currency. Only a few eccentrics speculated about weather it might break up one day.

Greece has changed all that. New York based investment bank Morgan Stanly is among those saying investors have to consider the possibility of a euro collapse.

the Greeks don't appear to be in any mood for the years of grinding austerity their economy will need. Nor do the Germans seems willing to continue helping out what they see as a bunch of Mediterranean layabouts. when a relationship is that fundamentally incompatible, even the most skillfull marrriage counselor might think it was time to start dividing up the assets.

so if the euro might not be around in 2020, here are seven trades to start pondering:

 

1. Buy German Bonds and sell the DAX index. Germany is one of the most creditworthy countries in the world, but it's being dragged dwon by spendthrift neighbors who hitched a ride on the currency union bandwagon. outside of the euro, German bonds would soar. but so would the new Deutsche Mark, hurting the exporters that dominate the DAX
   
   
2. buy the Dollar. sure it has its own problems. the US's budget and trade deficits are huge and its share of the global economy is in long-term decline. but the euro gone, the dollar would be the only serious reserve currency at least until china decides to take on that role. without any competition, the dollar would only strengthen.
   
   
3. buy italian shares. Italy has been the big loser from the euro. Greece, Ireland and Spain all rode a bubble created by cheap money. Italy has been stuck with a decade of restrained growth compared with the 1990s. Liberated from its euro shackles, the italian economy could start to motor again if its currency could be devalued and wages could be held in check.
   
   
4. Sell Spanish banking stocks. led by Banco Stantander SA, Spanish lenders have risen to global prominence as mid-may, Santander was the 11th largest bank in the world, measured by market value. Banco Bilbao Vizcaya Argentaria SA was in the top 40. but Spain is a small country, with high unemployment and an economy still in recession. Without the Euro, its banks would find it impossible to maintain their positions in the global financial system.
   
   
5. Sell anything to do with Belgium. the euro's collapse would marke the end of the expansion of the European Union or what's sometimes known as the Belgian Empire. As the hub of a global superstate, Belgium has a certian status. without that distinction. it would become small place where you could buy some nice chocolates and change trains.
   
   
6. Buy the Pound. Sure, the UK might have terrible budget deficit, shaky banks on every corner and a coalition government. But at least it stayed away from the mess of currency union, and so now it just has to save itself. Againsst its neighbors, it would look rather stable. that should be worth a few points on sterling.
   
   
7. Buy airlines. for a few years, the new drachma would make the iraqi dinar look like a haven of stabolity. it would plunge and wealthy Europeans would be taking three or four holidays a year on Greek islands. that would be great for the companies that fly tourists there. add in the weakness of the new Portugues escudo, Spanish peseta and Italian Lira, and the guys at Airbus SAS will be working night shifts to keep up with the demand for new planes to get everyone to the beaches.

A fortune is waiting for investors who get on the right side of history, and everyone else will get cheap holidays. Maybe these storm clouds will have a silver lining after all


Matthew Lynn, Bloomberg Markets Magazine