Sunday , 14 April 2024

Doomsayers' Dire Scenarios for Euro Zone Overdone – Here's Why

Predicting dire scenarios for the euro zone has become a cottage industry. Each day well-respected economists and investors explain why the collective economies of Europe are doomed – that it’s only a matter of time – but I outline here 3 reasons why becoming too gloomy on Europe might be the wrong approach. Words: 600

So says Dave Glen ( in edited excerpts from his original article*.

Lorimer Wilson, editor of (Your Key to Making Money!), may have edited the article below for length and clarity – see Editor’s Note at the bottom of the page for details. This paragraph must be included in any article re-posting to avoid copyright infringement.

Glen goes on to say, in part:

George Soros set a new standard for drama in his interview last Friday with German news magazine Der Spiegel [in which he claimed that] the euro was doomed and that The End was coming – last weekend – stating: Angela Merkel is trapped. She has realized that the euro is not working, but she cannot change the narrative she has created because that narrative has caught the imagination of the German public, and the German public has accepted it.

OK, I’m not a billionaire, and George Soros has been an incredibly successful investor for a long time, but did he really believe that we were on the verge of financial catastrophe by the end of this week?

[Below are three] reasons that becoming too gloomy on Europe might be the wrong approach:

1. The situation is well-understood by all involved. The necessary resources are available, and potential solutions available; it’s just the political will that’s lacking.

For example, Eduardo Porter writes in today’s New York Times why many believe that, in the end, Germany will pony up the necessary funds to bail out the situation. It’s not that the Germans like the idea – Mr. Porter notes that most Germans surveyed would love to get rid of Greece from the euro block – but rather it is in their own self-interest, and they might make a profit besides stating: William R. Cline, an economist at the Peterson Institute for International Economics, told me that covering the entire financing needs of Greece, Ireland, Portugal, Spain and Italy through 2015 would cost about $1.6 trillion and if the International Monetary Fund contributed one-third, Germany and other rich euro area countries would be left to put up the rest….Germany…would not forfeit this money. After all, the goal of the bailout would be to prevent defaults. Germany could even turn a profit.

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Think back to our own economic disaster a few years ago. The idea of lending huge sums of money to bail out the banks – not to mention AIG, General Motors and Chrysler – was anathema to many politicians and economists but in most cases the bailouts worked, and most of our government’s funds were repaid at a handsome profit.

2. [June’s PMI report for the Eurozone was unchanged from the previous month – see details here]…

3. Foreign investors are buying up European companies, taking advantage of some of the most depressed stock market valuations in years. This is concrete proof of the continued strength of many parts of Europe. Yesterday’s Financial Times highlighted the increasing interest of global investors in European companies. The article notes that: A series of high-profile deals this year highlights the growing interest of emerging market companies in making acquisitions in Europe…For European pessimists, {large profile foreign acquisitions} is another reflection of Europe’s economic crisis and/or terminal economic decline. For optimists, they may be a sign of better things to come, just as a wave of Japanese investments 25 years ago helped reinvigorate key parts of the European economy, notably the British car industry.


I’m not denying that the euro problems are real, and the resolution will doubtlessly be difficult, but I continue to believe that the ultimate resolution will be positive.

*  (To access the above article please copy the URL and paste it into your browser.)

Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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