I live in the old continent but I am honestly super tired of the whole EU debt crisis. I have a feeling the problems started after the Great Financial Crisis (GFC) in 07-08 and it obviously never got properly solved.
Although I do not enjoy it, I canât help getting exposed to it.
So Corona has obviously done damage to economic activity and the EU governments basically ow their people and businesses some money so that we would stop working during âThe LockDownâ.
Now obviously some countries got hit quite hard and the economic damage is definitely pretty ugly.
Therefore there are discussions about stimulus packages and Eurobonds and all that.
All these proposals are meant to help us and inevitably lead to a future where EUROPE > Member State (yes even for Ze Germans).
Not everyone is happy about this of course and those people would be right in using the graph below in their anti-EU messaging.
đ§: So yeah, things are Ugly for the EURO Block. The stonks here have underperformed the 100 biggest US stocks and Economic growth in Italy has been flat for 20 years.
As I said before the easy Boogie man is the EURO. And it is fair we assign it part of the blame for all the misery because of how the EURO-System limits state power.
Maastricht Treaty and the deficit rule (basically gov has to balance the budget).
They canât devalue their currency to become more competitive or lower de debt burdens.
Another thing I hear Southern-Europe complain about is the all-time low-interest rates.
As you can see the yields on the medium-term Gov-Bonds have spiked upwards due to corona. And while these yields are still historically low governments arenât happy about the difference they need to pay compared to what Ze Germans pay. These governments all share a common currency and they are also in the same political union. And it is in that political union where I think things get a bit complicated.
Noticed how nobody ever talks about the spread between Mozambiqueâs 10Y USD bond yields 7% and the Brazillian-10Y yields 8% (I didnât look up the numbers). The only thing these two bonds have in common is that it is issued in a currency not their own.
Witch is a whole rabbit hole on its own. I might write a bit about in the future.
Anyhow, I donât know what will happen to the currency but I know it is really an important part of the future of Europe. So letâs hope they fix what needs to be fixed and do so fast. Although if history is a lesson I doubt it would be fixed or that it would be fast and that would be no good news for the eurocrats.
Sadly, to be continued.