On a Euro-debt-crisis vacation, one sees many U.S.-like divisions

Oct 18, 2011

"One theory is the world must reach the brink to find the leadership needed for resolution ..."

Greece is the epicenter of the European debt crisis so, naturally, financial commentator Greg Heberlein went there on vacation! Unfortunately what he found there and elsewhere outside the U.S. were divisive politics, blame all around and the potential for economic doom.

On this week's Money Matters, he shares his observations with KPLU's Dave Meyer.

Where did you go?

We cruised from Venice through Greece and Turkey, a voyage of a lifetime. Being the newshound I am, I spent way too much free time watching BBC and SkyNews, plus television newscasts in other countries, to stay abreast of the worldwide financial calamities besetting us.

What were your impressions?

It is fair to consider the situation bleak. It is difficult to avoid the fear of an economic depression across the planet.

No matter what country we call home, the divisions are deep, at times seemingly irreconcilable. The politics are divisive no matter where you look. Those on both sides, and in the independent middle, are baffled at the inability to reach a compromise.

How does it differ in Europe?

It doesn’t, no matter the party in power. Traveling through seven countries, I’d say it’s true no matter whether a nation is ruled by liberals or conservatives. The race to avoid a meaningful solution is a dead heat.  Throughout Europe, the schism is no narrower than in the United States. The blame game supplants the solution game universally.

Are liberals or conservatives at fault?

In the U.S., both sides have economic bones to gnaw at. But look at Britain. An archly conservative administration is under serious attack from both sides as well. Not enough fiscal restraint on one side, too much says the other.

In France, liberals fear the liberal administration is giving the store away. Conservatives say the government, despite being conservative, relies too much on government interference.

The reverse dominates Germany. Many liberals rage at the country’s position that banks and their investors should bail themselves out while governments stand aside.

So how does that play in the smaller economies where the pain seems most intense?

The same divisions occur in miniature in the countries most likely to drown:  Greece, Italy, Spain, Portugal, Ireland, the list of those in the fiscal infirmary is endless. And precisely the same arguments appear – too much or too little government involvement.

One theory is the world must reach the brink to find the leadership needed for resolution. Another theory is the world already is beyond the brink. Fear begets fear – the more citizens fret, the more likely disaster looms.

No matter how implacable the situation becomes, a slender thread of hope remains. At some point, a resolution will be exacted, and it won’t matter to the survivors whether liberals or conservatives are responsible.

What should investors do?

If everyone decides to put their money under a mattress, things will just get a lot worse. Invest in companies that have been in business for a long time. Many blue chip stocks are paying more in dividends than you can get from bonds. And times of high market volatility can provide opportunities for those who can afford the risk.

Money Matters” is a KPLU feature covering the economy, investments and more. The feature is published here and airs on KPLU 88.5 during Morning Edition and All Things Considered on the second and third Tuesdays of the month. It also airs on Weekend Saturday Edition.