Saturday, December 27, 2008

Lessons From 2008 Part 4: Europe

How is Europe a lesson? Well, okay I couldn't think of a folksy trite phrase to sum up the year across the pond but really what happens in Europe isn't staying in Europe these days so here's a quick recap. Things are going wrong and fast.

7. Europe: Yappa's got a nice piece here on the impending doom and gloom. Here's the deal (and by deal I mean massive oversimplification). While the economic collapse seemed to start on Wall Street and the United States housing market, the dirty little secret is that good old left leaning inteventionist Europe bought this subprime stuff hook, line and sinker. This is particularly true in the UK where Europe's problems began. British banks started failing along with Bear Stearns back in March. Simultaneously, the seriously overheated British housing market froze on the spot. Now, in and of itself this is bad news for the global economy. For Iceland, this meant that all the money Icelandic banks had been raking in trading asset backed credit paper (ABCP) all of a sudden disappeared. The Icelandic economy basically went off a cliff. One down. Ireland's economy hit the skids hard as well, as the Celtic tiger was declawed by the subprime mess.

In Eastern Europe the crisis hit hard as well. In particular, booming Latvia was hit hard. The IMF has now bailed out the Baltic republic. Yes, Virginia, the IMF bailed out a member of the European Union. There was a time not long ago when Latvia was being talked about as one of the next countries to join the European Monetary Union (also known as the Eurozone). Now... not so much. If Latvian banks fail expect ripples to spread through the other Baltic republics as well as much of Scandanavia (where the Swedish and Danish crowns have already been hit hard). Hungary too has imploded and also received IMF help. Make that two EU members on the IMF dole. Ukraine (not EU) is also facing tough times as the heirs of the Orange Revolution prepare to tear each other apart in elections and the Russians once again threaten to turn off the gas. The less said about former Western darling Georgia (site of the Rose Revolution), the better. The only good news right now is that the oil prices that were threatening to choke off cheap air travel between and Eastern Europe and Western Europe have fallen, allowing all those Eastern Europeans doing work in the UK and Ireland to keep their jobs in the West and homes in the East.

Politically, well... the Lisbon Treaty died when the Irish government was forced to actually consult the people. Damn voters always get in the way of democratic progress! Seriously, the EU is about as democratic as the Liberal Party of Canada. Sure, the measures are there, but they'd rather not use them. Oh and then there's Belgium. The good news: the Belgians found a Prime Minister in March after nine months of separatist related wrangling. The bad news: he didn't last the year. Every time someone says we should do more to weaken the federal government in order to appease Quebec separatists, take a long hard look at Belgium. It will soon be the Republic of Flanders and the Kingdom of Wallonia if current trends continue.

So what's the lesson. I guess it's this. Everytime a leftwing politician tells you they do such and such better in Europe, smile and thank the powers that be that you live in Canada.

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