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5/14/2012

The trouble in Europe should simply be no surprise to anyone.

If you have been one of our consistent readers, the recent events that have been occurring across Europe should be no surprise and we will reiterate the message we voiced late in 2011 and repeated early this year; that the likelihood that Greece will leave the EUROZone is very, very high.  The basic fundamental reasoning is that Greece is simply not a major industrialized economy that can grow out of the massive debt that it has accumulated over the years (with or without austerity measures).  Given that reality, all the bailout money that was used to kick the can down the road all of last year was simply a wasted exercise to buy time.  The poor decision making by Merkel of Germany…or should we say, lack of decision making, has resulted in a powder keg.

This buying of time actually magnified the intensity of the problem and the result has been the ousting of many governments across the continent with replacements siding on the easing of austerity measures.  So what does that produce?  That produces a bigger problem as it will intensify the core of the conundrum…numerous countries not being able to afford the debt they have accumulated.  And as is the case with Greece, there are a few countries that simply don’t have the industrial economic power to grow out of their problems.  So what’s the answer?

The answer is a EUROZone that is smaller (less member countries) but stronger….and that will only be the result from smart, powerful decision making, which seems to be lacking in EURO Land at the moment.  Had Greece been permitted to return to the Drachma a year ago, they would have begun the process of healing by now and Billions of EUROs could have been saved to help stabilize the rest of the zone.  The bottom line to this massive mess that is getting worse???  Make the difficult decisions early on and STOP KICKING THE CAN.  Buying time by kicking the proverbial can is simply the same as ignoring the problem, a problem that gets worse over time.

Oh, by the way…will Europe’s problems affect the US?  You bet they will.

 

Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR

 

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