In the media, they have been referring to Greece as if it were the Achilles’ heel of the European economy. If we analyze the growth of the Euro from a historical standpoint, it would be plain to see that they gained ground against the US dollar by using a strategy that involved adopting new countries into the European Union.
The fact of the matter is that the global financial crises have put a strain on the euphoric growth prospects of Europe.
When you take a closer look at the various Greek bankers, you will notice that they have invested and loaned money to the old Soviet Union. Apparently they were anticipating that the various eastern bloc economies would be adopted into the EU.
Let’s take a closer look at Greece and Greek bankers for example. This recent Deutsche Bank report, produced by Marion Mühlberger on June 24, 2011, says:
“In recent weeks, contagion fears from Greece to Eastern Europe have resurfaced. There are three main contagion channels which could be looked at: First, contagion via reduced bank lending from Greek parent banks, second, contagion via reduced exports to Greece and third, contagion via foreign investors selling their portfolio equity and debt holdings given a general increase in risk aversion. The chart visualizes the first contagion channel, which is very relevant for Eastern Europe given the strong presence of Greek banks in South-Eastern Europe. The chart shows that after Cyprus, Bulgaria and Macedonia would suffer most from the potential withdrawal of Greek parent banks, as foreign claims by Greek (parent) banks account for 28 percent of GDP, in the case of Bulgaria. These foreign claims of Greek banks not only consist of cross-border lending of Greek banks to their subsidiaries but also domestic lending of those subsidiaries in the respective country.”
From that report it seems that Greek banks are lending to countries and industries that are not well renowned for their industrial strength.
It seems that they are exposed because they were under the impression that the expansion of the Euro into the eastern block, would be the catalyst that boosted the value of the investments.
The problem in June of 2011 is that the various candidate countries that are yet to be adopted by the EU are probably going to hurt the overall economy of the ECB as opposed to build the economy.
It’s high time for the European Union to consider a renaissance of industrialization with in its own borders.
They need to avoid making the same mistakes that were made in the US, simply because those who do not learn from the mistakes of history are doomed to repeat it.
Let’s stop and consider that economies have evolved from a hunter gatherer — to a farmer — to an industrialist — to a white collar service-oriented economy.
Then the service industry was literally supplanted by the Internet as we have all witnessed the cannibalization of newspapers, financial advisers, doctors, lawyers, advertisers, and the list goes on.
The fact is that economies around the globe have pushed industrialization East to Asia in a hope of capturing some cost cutting strategy.
The fact is that both America and Europe have been blindsided by the Internet economy, which has seriously diluted the service industry.
We have all heard the recent rhetoric of President Obama as he seems to be on the right track with regard to advocating industrialization.
The focus on Industry in his recent speeches seems to have struck a chord that resonates with the entire global community.
The simple truth is America and Europe cannot survive as a consumer oriented economy that is hooked on revolving credit.
They are never going to settle their debt issues based on sales taxes in their shopping malls and distribution outlets.
Therefore the re-industrialization of the evolved economies of Europe and America is the ideal self-sustaining strategy for those regions, specifically because of the potential for creating jobs.
As many of you know, we here at The KIN Consortium have been advocating boosting the manufacturing sector in Saudi Arabia in a number of articles.
The fact of the matter is that we were merely reinforcing the will of the Custodian of the Two Holy Mosques King Abdullah, who in his infinite wisdom, has systematically been building the infrastructure for both economic cities and industrial zones.
In our humble opinion, we believe that the development of the Kingdom into an industrialized nation is part of the future global trend.
The political rhetoric in the media seems to be about reducing imports and increasing exports, which will in turn make every nation endeavor to become a self-sustaining economy.
At the very least each nation will produce the staple goods and services that it needs for its economy.
This will serve as the ideal buffer zone in the event of chaos in neighboring countries.