Europe's Giant Ravine

When we are talking about Europe slumps, there is always a question about when it will end. Comparing it to the US depression, which has been recovering now in about 3 years; it takes so much longer. US has hit its lowest unemployment rate in 4 years, indicating recovered economic growth. So what makes Europe very hard to go back from the crisis?

http://www.etftrends.com

It is probably the mistakes made from the beginning. With the first country ever having the crisis, Greece, the other more wealthy countries offered monetary help. It creates a huge issue of moral hazard. There is a saying do not give the fish but the baits. This is absolutely not applied here. Then, the problems spread to other countries such as Spain, Italy and Portugal. It is such a shame for the citizens of German or France that they have to pay higher tax to cover the losses happening in the poorer countries. The effect is the economy in those rich countries is also slowing down because of higher taxes. Then, it is not sure as well, where the money goes, how it is contributed, will it reach the people who really needs it and so forth.  Now the problem is getting so deep that it has Europe has jumped itself to a huge ravine.

The using of the same currency, Euro, even makes it hard to recover. With the US, it is easier to regulate its own country. During the financial crisis, every parts of the country were facing the same problems. The government then apply the same solution for the whole country. US can do everything it wants with US dollar basically. Imagine Euro. There are about 27 countries using Euro and 17 in them are regulated within the European Union. It will be hard for the European Union to launch a regulation that benefit all the members as each member will have different economic condition in their own countries. It will be hard to decide as well, whether Euro should appreciate or depreciate because all the countries will have different stages of economic growth.

Investors have also been very pessimistic about the situation in Europe. Only the high risk taker will invest in Europe at the moment. Just look at the 10 years bond rate of Greece at the moment, it is around 18%, comparing to only 3% at UK. It reflects the extremely high risk investing in Greece. The market share also has been decreasing for the past years. Even though the market has slightly been increasing for the past few weeks, still, if there is a speculation of economic doubt in Europe, it will slump again.

Thus, when it comes to the question when Europe will get out from the recession, no one can answer, absolutely not in the closer future. European Union should address the fundamental problems first rather than only giving money to the countries. That means creating jobs, improving education and reducing the inequality.