Unemployment in the United States has reached the pre-crisis levels, profitability of companies climbed historical highs (as well as cash volumes in balance sheets), the S&P index floats unprecedented above 2000 points and above all, we have witnessed a significant debt reduction of American households as the most essential part of the U.S. economy, which are currently ready to spend like never before – if they decide to do so. As Gordon Gekko once said (Wall Street, 1987): „Greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit“. If so, the U.S. economy can be awaiting bright tomorrows rather than a depression. And what happens here? We can sense the topic of deflation is being brought up so often you might think it can’t get worse. „Where have the comrades been wrong?“ (Pelíšky, 1999) I watched a Poirot episode this weekend when a persistent idea was put upon my mind – what would the findings and their impacts look like if someone investigated this current European affair? Who caused this and why? Whom to blame? However important questions shall come first. Who are the main participants involved in the European affair?
Cui bono? Who will benefit from the given state of affairs (a question asked since March Tullius Cicero)? How have those involved acted? The main participants can be split into north and south without influencing the validity of the hypothesis. Central Europe is a topic on its own which I will discuss in the last paragraph given it is our home land. Great Britain is excluded from the EU dialogue for one prosaic reason; the fact that the monarchy intends to keep it excluded. At least it can be said that their policy making is not quite compatible with the policy making of the European Union.
Cui bono? Let us keep the results in mind when posing this question. Who is the real winner within the EU, who benefits from the current state of affairs and recent decisions? The answers are not hiding very far, literally and geographically. While southern Europe is going through a purgatory, the north prospers. Unemployment in Germany is approaching record lows, the budget is balanced, the DAX index recently exceeded 10000 points for the first time in history, albeit not for long. As a comparison, the pan-European Euro Stoxx 50 index which includes south European companies as well is more than a quarter below its historical pre-crisis peaks. German exports have however skyrocketed to numbers previously undreamed of and Frankfurt suffers from a developing real estate bubble, a clear sign of an economic boom.
Where is all this success coming from? Can it be attributed mainly to the achievements of the German export industry, which creates new jobs and employs subcontractors while offering excellent pays, and so on? And if so, what causes it to thrive this much? Are there many exceptional circumstances (perhaps coincidences?) at play, such as low interest rates, a weak, a very weak euro indeed and last but not least an acceptable tax burden? Let us take a closer look. If it wasn’t for the Eurozone, the Bundesbank rates would highly likely differ from the current ECB interest rates. This enables the successful German industry to finance its investment activities as cheaply as never before. If it wasn’t for the Eurozone, the German mark would probably be quite a bit stronger than the so many times challenged euro. One could only speculate about how much more would a Mercedes cost in the U.S. compared to Asia and how much less would it therefore be selling in the States. The tax burden of German companies has been stable in recent years, a phenomenon in Europe per se, let alone the rumors about even a lower upcoming tax burden. A balanced budget does not ask for more. This is called a favorable stellar constellation, provided it is all a coincidence
A notable difference can be seen in the clear policy consistency observed in case of northern Europe while the south struggles with continuous personal changes. You will not go far if you keep changing the driver and the road. Angela Merkel is the face of the decade. So what about us, Central Europe? Our Slovakia.
Central Europe wears a belt of success without a doubt. Warsaw, Bratislava and Vienna exceeded their pre-crisis peaks long time ago and economically speaking they belong clearly to the northern part of Europe. Budapest goes its own way but Prague should not rest satisfied. We, Slovakia, have overcome the pre-crisis levels already some time ago. Unemployment rose, accompanied by a sharp boost in labor productivity, which turns out to be very important for foreign investors. We are the best in region in this respect, the most competitive. This is a positive point of view. Although we are not to blame for the state of European affairs because we simply do not have much say in them, we should be glad for the current outcome.
What can be concluded at this point? Standing at crossroads, a proven scenario imported from across the ocean is likely to start unfolding. So in the end, 2015 could be a good year. With a copyright license and a freedom of opinion,
Yours Peter Bobik