Nov 30 2010

The end of the EU as we know it

Published by at 9:32 am under Europe,Opinion,Top Stories,Uncategorized

I would have loved to write something on the Euro crisis today, but time doesn’t allow me. So, here is another “warm-up” – something I wrote earlier this year. Between May and September 2010 economists and governments all eagerly revised their growth forecasts for 2011 and beyond up. On 25 May 2010 (with the Greek tragedy still fresh in our minds) I wrote this:

The Financial Times Deutschland (FTD) today published the confidence indices for May and they were down. But, and this is the interesting point, the FTD quoted economists who reckon the confidence shock (ministered by the Greeks) “will not affect growth materially in 2010 and 2011″.

They must be assuming no further confidence shocks. If that is their assumption, I must say I think it’s an unrealistic one.

The EU needs to be “rebuilt”. Sooner or later this truth will hit the market and the politicians. For an EU to be viable, it will have to be very different from the existing one. So different, that countries will have to decide afresh whether they want to be part of it. And, when the time comes, many current members may decide not to be members of the proposed, new EU. So, a smaller EU will come into existence.

All of this will drag out over time and all of this can definitely not happen without shocks to the business cycle. I think there are economists here in the EU who see this scenario on the horizon. But, until now, no-one has dared to spell it out.

Today, I believe in my own scenario more than ever before…

For more on what I mean, look here. (And, yes, I got my time horizons wrong somewhat, among other mistakes! But that’s fine. Looking forward is not a science, it’s a hobby.)

One response so far

One Response to “The end of the EU as we know it”

  1. adminon 01 Dec 2010 at 11:24 am

    One day later and reading the newspapers this morning got me really worried. The whole damn thing could tumble down. Scary stuff.

    If I had money, I would have gone overweight in physical gold at this point. But, then again: it’s priced in US dollar – a potential victim of the coming instability. Maybe simply Swiss franc? I don’t know…


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