Will EU survive

EU which was formed by 27 member states for free movement of people, goods and services. EU reforms were formed to provide economic co-operation amongst its member states and not political allignment. So EU is designed to support soverrign of its member states as per EU monetary policy.

EU shares a decade old currency "EURO" which is shared by 17 of its 27 Eu nations. Many pandits are suggesting that EU would collapse soon. But i would explain problem with EU in 3 parts.

1. Default of Greece
2. Collapse of EURO triggered by default of Greece
3. Collapse of EU triggered by default of Euro

So default of Greece would create default of EU. 

Now. as far as Greece is concerned

• Greece shares a common currency EURO with Eu member states.
• The Debt-GDP ration of Greece is hovering at 160%
• The GDP of Greece is shrinking @ 7% a year
• So since GDP is falling the debt-GDP ration is bound to rise year on year
• Since the Debt-GDP ratio is bound to rise that will devaluate the EURO 
• Greece's incompetitive economy is also a primary reason for failure
• Greece however borrowed heavily and also failed to repay its obligations

ECB monetary policy mentions that EU nations have to support soverign of member states. So storng EU nations (Germany & France) will bailout Greece. However ECB will keep giving austerity packages to let Greece survive. But till when would this continue. This would continue till strong nations are capable enough to support sovereign of their own and other weak member states.

The European banks are also at a blame thinking that if Greece failed to repay back the EU will bailout Greece. So they kept on issuing debt to Greece.

The problem in the nut-shell is a common currency a common currency requires a single government, a common monetary policy and a political will which is lacked by EU. However in case of EURO this project was created without this fundamental background and avoidance of this has led to this problem.

The answer to survival of EU is EU will survive with or without EURO. Because it survived even before EURO originated. However untill EU issues are resolved the toxic assets as far as Europe is concerned are.

1. Currency - EURO
2. FTSE
3. Property investment across Europe

Kuldeep

ecomaniac