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U.S. Should Watch and Learn as the Euro Land Churns

Thursday, 06 May 2010 10:49 AM

By David Skarica

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So now we have a real soap opera in Euro Land.

Here are the actors:

Greece – This is the lying little kid. The child who will say anything to get what he wants. Lies about revenues, lies about deficits. Wants something for nothing. Wants to stay in the euro even though it can’t meet the criteria. Really, this kid should be kicked out of the house, but the parents don’t have the guts to do so. Greece has nice beaches, but I wouldn’t want to be in government there right now.

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Germany – This is the person who can’t make up their mind. One day Merkel says no bailout; next day she says a partial default. Another day she says that the Greeks must really monitor the situation. Trying to appease her electorate and the rest of Europe at the same time.

Portugal and Spain – The P and S of the PIIGS, these are Greece’s brothers. How Portugal got in the euro, I'll never know. It has a GDP per capita of $22,000 — this is half of the United States and 25 percent less than the Bahamas. It is actually borderline second-world. Portugal is a minor player, as is Greece. Spain is the big brother who could really disrupt the family if he has problems. Spain’s debt to GDP is not a problem yet, however. Spain is inefficiently regulated. Spain's union-riddled economy is going to make it harder to get flexible and out of its financial mess.

Then we have the other major players: France, Holland, Belgium and Austria. They are very quiet. It seems like we only hear from Germany.

This is why the euro is tanking. It has a lot more to do with the structure of the union than the financial situation itself.

One could argue that the financial situation of the United States is just as bad, if not worse.

However, the U.S. can always borrow and print money to bail out its little brothers (the states).

Europe bickers and cannot come to any sort of concrete solution.

My opinion is that this family needs some tough love.

Kick the bad little kids out: Portugal and Greece did not play by the rules. Let them go back to their currencies: print, default and start over.

This will make the euro a stronger union and send a message to those who do not get their house in order.

In addition, the turmoil in Greece is also a warning to the United States.

However, the U.S. is not above the law of economics. It is estimated by usgovernmentspending.org that the U.S. debt to GDP will be 116 percent by the end of 2011 (including the states).

If the United States continues the way it is going, it will be Greece times 1000 in about 3 to 5 years.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.

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