When Europe Sneezes

What country in the European Union (EU) has the greatest external debt relative to its GDP?

No, it’s not Greece.

Nor is it Portugal or Spain.

But it is one of the “PIGS”.

Ahh, yes! It is of course Ireland.

In fact, Ireland’s gross external debt in 2008 was $2.4 trillion ($2386 billion) while its GDP was only $188 billion giving it the greatest external debt to GDP (1267%) in the world.

This is external debt and not national or so-called sovereign (public) debt.

And the nation with the second greatest external debt as a proportion of their GDP in the EU (and also the world) is…

… Switzerland, with $1.4 trillion external debt to $316 billion GDP (2008) or a ratio of 423%.

In External debt statistics of the euro area (presented at the IFC Conference on “Initiatives to address data gaps revealed by the financial crisis” Bank for International Settlements Basel, Switzerland 25-26 August 2010), Jorge Diz Dias, Directorate General Statistics, European Central Bank concludes:

… a net external debt ratio above 50% combined with a ratio of net interest payments to GDP larger than 3% seems to be a very powerful indicator for potential external debt difficulties in the short to medium term.

The nation with the third greatest external debt to GDP in the world is another EU nation and is none other than the United Kingdom. Yes my friends, the UK has an external debt of $1.3 trillion to compare to its $316 billion GDP, or an external debt:GDP ratio of 408%. The UK, one of three EU powers, has an external debt four times as much as its GDP!

But hang on, it gets better…

Next on the list is Netherlands with an external debt to GDP ratio of 365%, closely followed by Belgium (320%) and Denmark (298%) – all ‘good’ EU nations.

Seventh on the list of nations with the greatest external debt to GDP is Austria at 252% and eighth is another EU power, France at a hefty 236%.

Coming in at ninth place is, yep, another EU nation but perhaps not surprisingly, Portugal at 214%.

Rounding out our top ten nations with the greatest external debt (as a proportion of their GDP) is Hong Kong – at just over twice its GDP.

The Scandinavians of Norway (199%), Sweden (194%) and Finland (188%) are eleventh, twelfth and thirteenth placed, respectively.

And the nation with the fourteenth highest external debt to GDP worldwide is… wait for it… Germany. The EUs undisputed pre-eminent power has an external debt of just over $5 trillion for a GDP of just on $3 trillion; or a ratio of 178%.

Well, I’ll be…

Even Spain’s external debt is at a lower percentage of its GDP at 171% and to add salt to the EU wound, Greece comes in 16th position with an external debt of $552 billion compared to its GDP of $343 billion (161%).

Number 17 on the list is Italy (127%), then comes Australia (111%), Hungary (106%), and closing out the top 20 is none other than the “U, S of A” with $208 billion external debt and $197 billion GDP (106%).

Is this a joke?

No. This is only too real and it belies the EU big three’s propaganda for it clearly shows the following:

  • Nine of the top ten and 17 of twenty top external debtors to GDP are from the EU
  • The three EU superpowers who are endlessly prosletising to the “PIGS” have a higher external debt to GDP than either Italy, Spain or even Greece
  • The US external debt is roughly the size of its GDP
  • The UK external debt is four times its GDP – the 3rd highest in the world
  • Germany’s external debt to GDP (179%) is greater than that for Greece (161%)

What does this all mean? It simply means this:

    1. Greece is but the tip of the proverbial EU iceberg and as one of the smallest member nations has been unfairly used as an example as the first to default on its debt obligations
    2. PIGS is a (perhaps deliberately) unfortunate acronym by EU debt standards
    3. The EU in-toto is a basket case
    4. The current difficulties in the US economy (position 20 in the above list) bode very poorly for the EU
    5. Incredulously, the EU powers especially the UK and Germany have the loudest voice yet also some of the largest debt

In fact, these external debts are mostly debts within the Euro; so much so that the UK, which is in the throws of a double-dip recession and drowning in debt, has most to lose in the event of a Greek default.

Hmmm. That explains the disconnect between the EU noise makers or finger pointers and the minnows who are being pointed to.

The EU has been teetering on the edge for some time but with world opinion mostly focused on the lesser evils of Greece, Spain and Portugal. The greater peril however lies in their greater nation states. Despite well-described corruption in the former nations, it is in Germany, the United Kingdom and France were the EU is demonstrably ‘sick’ – the submerged part of the iceberg. And as the EU continues to unwind economically and a day of reckoning approaches, let’s hope that their individual and collective societies evade any spiral into the depths of social despair; a spiral within the centre of which would be revealed a void for potential re-emergence of political insurrection and even war.

One only has to think of Europe’s involvement in the World Wars; lest we forget.

(Don’t) Be Fooled

Don’t be conned over the next few months (Aug and Sep are traditionally good times for share markets), it’s all there in front of you, in black and white:

The Spanish jobless rate has just hit 24.6% – Yahoo News, 27th July 2012.

Greece may run out of money by Aug 20 – Telegraph, 26th July 2012.

On July 25, 2012, Reuters reported that the National Statistics said Britain’s gross domestic product fell 0.7 percent in the second quarter (the sharpest fall since early 2009) confirming that Britain is mired in its second recession since the financial crisis, with the economy shrinking for a third consecutive quarter.

If the euro zone’s crisis intensifies, the Russian economy could contract by 5% over the next 10 to 12 months – Wall Street Journal, 25 July 2012.

Greece is in a “Great Depression” similar to the American one in the 1930s, the country’s Prime Minister Antonis Samaras told former US President Bill Clinton on Sunday –
Telegraph, July 23 2012.

The ranks of America’s poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net – Associated Press (Washington), 23 July 2012.

A German SurpRISE

– by Victor Davis Hanson Hoover Institution, Stanford University December 15, 2011

The rise of a German Europe began in 1914, failed twice, and has now ended in the victory of German power almost a century later.

The Europe that Kaiser Wilhelm lost in 1918, and that Adolf Hitler destroyed in 1945, has at last been won by German Chancellor Angela Merkel without firing a shot.

Or so it seems from European newspapers, which now refer bitterly to a “Fourth Reich” and arrogant new Nazi “Gauleiters” who dictate terms to their European subordinates.

Popular cartoons depict Germans with stiff-arm salutes and swastikas, establishing new rules of behavior for supposedly inferior peoples.

Millions of terrified Italians, Spaniards, Greeks, Portuguese and other Europeans are pouring their savings into German banks at the rate of $15 billion a month.

A thumbs-up or thumbs-down from the euro-rich Merkel now determines whether European countries will limp ahead with new

German-backed loans or default and see their standard of living regress to that of a half-century ago.

A worried neighbor, France, in schizophrenic fashion, as so often in the past, alternately lashes out at Britain for abandoning it and fawns on Germany to appease it.

The worries in 1989 of British Prime Minister Margaret Thatcher and French President François Mitterrand over German unification — that neither a new European Union nor an old NATO could quite rein in German power — proved true.

How did the grand dream of a “new Europe” end just 20 years later in a German protectorate — especially given the not-so-subtle aim of the European Union to diffuse German ambitions through a continent-wide super-state?

Not by arms. Britain fights in wars all over the globe, from Libya to Iraq. France has the bomb. But Germany mostly stays within its borders — without a nuke, a single aircraft carrier or a military base abroad.

Not by handouts. Germany poured almost $2 trillion of its own money into rebuilding an East Germany ruined by communism — without help from others.

To drive through southern Europe is to see new freeways, bridges, rail lines, stadiums and airports financed by German banks or subsidized by the German government.

Not by population size.

Somehow, 120 million Greeks, Italians, Spaniards and Portuguese are begging some 80 million Germans to bail them out.

And not because of good fortune.

Just 65 years ago, Berlin was flattened, Hamburg incinerated and Munich a shell — in ways even Athens, Madrid, Lisbon and Rome were not.

In truth, German character — so admired and feared in some 500 years of European literature and history — led to the present Germanization of Europe.

These days we recoil at terms like “national character” that seem tainted by the nightmares of the past.

But no other politically correct exegesis offers better reasons why a booming Detroit of 1945 today looks like it was bombed, and a bombed-out Berlin of 1945 now is booming.

Germans on average worked harder and smarter than their European neighbors — investing rather than consuming, saving rather than spending, and going to bed when others to the south were going to dinner.

Recipients of their largesse bitterly complain that German banks lent them money to buy German products in a sort of 21st-century commercial serfdom.

True enough, but that still begs the question why Berlin, and not Rome or Madrid, was able to pull off such lucrative mercantilism.

Where does all this lead?

Right now to some great unknowns that terrify most of Europe.

Will German industriousness and talent eventually translate into military dominance and cultural chauvinism — as it has in the past?

How, exactly, can an unraveling EU, or NATO, now “led from behind” by a disengaged United States, persuade Germany not to translate its overwhelming economic clout into political and military advantage?

Can poor European adolescents really obey their rich German parents?

Berlin in essence has now scolded southern Europeans that if they still expect sophisticated medical care, high-tech appurtenances and plentiful consumer goods — the adornments of a rich American and northern Europe lifestyle —

— then they have to start behaving in the manner of Germans, who produce such things and subsidize them for others.

In other words, an Athenian may still have his ultra-modern airport and subway, a Spaniard may still get a hip replacement, or a Roman may still enjoy his new Mercedes.

But not if they still insist on daily siestas, dinner at 9 p.m., retirement in their early 50s, cheating on taxes, and a de facto 10 a.m. to 4 p.m. workday.

Behind all the EU’s 11th-hour gobbledygook, Germany’s new European order is clear: If you wish to live like a German, then you must work and save like a German. Take it or leave it.

Two Down

With a second EU nation’s leader gone this week, the historic waterway of the Meditteranean appears to be a line of symmetry, albeit with a time-lag to its north compared to its south. Leaders are being skittled off into all directions, and the question remains: who will fill the places? As Jim Puplava said… “Will we get someone like Winston Churchill or someone like Adolf Hitler?”

“Mafioso” and “thief” shout the Italians, to the man who was voted-in, probably by these same people, for over two decades; as if it’s his fault the nation is on the brink of collapse. Italy is on the brink of collapse, because it is on the brink of collapse; and it’s no good blaming one individual, albeit the prime individual of the country. As a politician Berlusconi perhaps merely reflected broader society. And fail it must.