The extent and diversity of European geography presents opportunities and poses challenges.
As the second largest entity in terms of GDP and purchasing power, the European Union’s business cycle fluctuations are sure to affect the investment market.
It’s all about knowing when — and where — the conditions will be positive.
We’ve seen the systemic risk of such a highly interconnected union.
Although the Global Financial Crisis of 2008 began in the United States, the fallout in Greece was particularly damaging; sour economic conditions led to unserviceable debt and default.
There was instant panic, especially among the Greeks’ European partners.
And it was because of the form of debt.
It’s a highly visible chink in the European armour: the common currency, the euro.
Like computers, if one user has a virus, the rest are open to infection.
Unlike the US, the countries using the euro have no system of fiscal transfers; there is no framework to correct economic imbalances that arise within the bloc. So, as the euro creates struggle in one country, it can drag on growth elsewhere.
Countries with an opt-out of the euro, such as the United Kingdom, are also tightly woven into the economic tapestry of the continent. Brexit makes this plain.
The pound is being hit hard as domestic markets face uncertain conditions in the wake of the decision to exit the bloc; the minutiae of details are all but decided, making investment difficult, weighing on exchange rates and increasing inflation.
Britain has gone from being the fastest-growing economy in the group of seven, to the slowest.
But the continent still has some powerful players…
For instance, the German powerhouse economy is still among the fastest in terms of GDP growth; job openings have recently hit historic highs, with few signs of momentum slowing.
Also notable is France. With the economy recently picking up speed; the country is experiencing its fastest growth rate in more than five years.
Likewise for Poland, with recent GDP growth in excess of 5%.
Europe and Australia
With economic relationships constantly shifting, so too is the global share market.
Of course, this means we must be wary of economic risks that arise, in all parts of the world.
If you want to stay up to date with our European friends, scroll down and check out all the articles we have on their unique economy.
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