Traveling through Europe this week…
I started traveling to Europe back in the 90’s and I remember well the Deutch Mark, the Italian Lira, the Spanish Peseta and the French Franc. Each country had their own currency and its own priorities about how to manage their monetary policy and support their national banks. Now the Euro rules in Europe (Austria, Belgium, Cyprus, Finland, France, Germany, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia and Spain are the 15 main countries who use the common European currency called the Euro) and it brings a centralization and control that helps countries work together to adjust to a global financial crisis.
This week while I was in Granada I talked to a businessman at the airport; yea I sat at the airport for almost six hours waiting for my plane. The businessman was reading the news paper called El Mundo and it caught my eye because my parents had worked for a paper called that in Argentina many years ago. We started talking and he told me that this crisis was worse than most people realize, and to be honest that included me, but that the European Union has the potential to do things much better. In his opinion the conversation between the EU leaders taking place would not have happened fifteen years ago. He remembered when Spain was under attack financially and one of its major banks was in trouble, when the government rescued it, the old Peseta had plunged and it caused very serious problems for Spain.
In contrast he pointed to the coordinated effort by the Euro currency nations was allowing them all to take action that would support all, and not pit one against the other as in the past. He talked very calmly and said that while things are bad, they could be worse by having it be like the old days.
Spain, I found out when I reached my hotel, just passed a 50 billion Euro package to support banks by insuring bank accounts up to 100 thousand Euros, up from 20 thousand. So that was taken as a good move. Today I read about the 6 major countries adjusting rates to favor the lending environment in the same way that the FED has done in the US. Add to it China and Hong Kong who’ve done it separately and you see that the worlds governments are working unprecedentedly together.
While the IMF (International Monetary Fund) is stating that the Global economy is heading into a recession for 2009 starting with the US, the word depression seems to be further out of the daily vocabulary from last week. There’s too much money in this world to sit on the sidelines for too long, and if the G7 can figure out how to work together, and set up programs that encourage investment, the investments will drive companies and they will drive employment which will provide more money flow into “main street” and things will begin moving again.
In a panicked world, the calm man profits. While I still don’t 100% agree with the bailout in the US, it has become obvious to me as I travel through Europe that the world is in a financial Crisis.
Let’s see if there’s any good outcome from the G7 meeting in Washington that helps get the panic out, and lay out a plan that will re-start the economies in the next 2 or 3 quarters and show the value of the Global economy.
Stay tuned, I’m certainly tuned in…