Tuesday, June 21, 2011

Greece....And Other European Countries that Don't Make Enough and Spend Too Much

Today will be the last post before I start the next series regarding Option Volatility. For the subject of Option Volatility, we will again be utilizing Python computer programming to write some programs.

Now on to the topic of why countries like Spain, Portugal, Ireland, and Greece are in the mess that they are.

1. Slow Growth Rates

 Note that Spain, Ireland, Greece, and Portugal are all sitting well below average in growth rates. This is an alarming statistic, unless they can control their spending by an equal or greater percentage as their declining growth rate. (UNLIKELY!)

2. High Unemployment Percentages
Notice again the higher than average unemployment rates present in Spain, Portugal, Ireland, and Greece. Spain for example is hovering around 20 percent unemployment; if they continue to sustain that high of an unemployment level while also maintaining slow growth rates, then the country will implode in a similar fashion as Greece.

3. Living Beyond Their Means

Here we look at debt as a percentage of overall GDP. The countries that are in trouble, as you can see, are looking at elevated percentages of debt as compared to GDP.

These countries continue to take on more and more debt, while their growth rates stagnate and unemployment increases.

It doesn't take much more than looking at these three charts to see that, maybe -- just maybe, Greece is really just the tip of the iceberg. Hold on Europe, you are in for a rough ride.

1 comment:

  1. Looks like El-Erian of PIMCO, might agree with me, read here http://www.cnbc.com/id/43489143