A glance at Europe’s economy and you might tell that it isn’t exactly doing very well. The European Union (EU) recorded a trade deficit of 8900 EUR million in August 2014 compared to a trade surplus of 1600 EUR million in July 2014. At different parts of Europe, Germany industrial production has decreased, while Italy and Spain youth employment rate are still above 40% and inflation rate was 0.3% down from 0.4% a month ago.

Supposedly Europe’s economic powerhouse, it seemed like Germany has not been performing. Could it be a mistake when the German government decided to venture from nuclear power towards renewable? The move sparked an increase in the energy prices which prompted some firms to relocate to places with cheaper energy. On the other hand, the German economy is export driven which means that when exports declined by 5.8% in August, it reflects partially the performance on the world’s economy.

Around the world, China’s economy is contracting while Russia, which accounts for 3% of Germany’s exports, is facing problems at home as Western sanctions hit and oil prices taking the plunge. The fears of Ebola have also affected consumers’ confidence while the threat of Islamic State of Iraq and Syria (ISIS) has gotten many countries to stay vigilant and participate in fighting terrorism wasting resources as day goes by.

To add salt to injury, it was recently reported that Prime Minister David Cameron of Britain has rejected the demand from the EU for an extra payment worth US$2.7 billion. The request was considered upon the provision of data which showed that the British economy performed relatively well than previously. That initiated a suggestion that on top of Britain’s annual payment of US$13.8 billion, it should rise of an additional US$2.7 billion. Mr. Cameron’s rejection of the payment was also a hint to represent Britain’s intention of leaving the EU. There would certainly be repercussions from Britain leaving the EU. It has been estimated that an exit would destroy Britain’s exports by about 30%. Right now, Europe currently accounts for about 54% of Britain’s total trade. Imagine how hard businesses are going to be affected if the British leaves the EU.

It would seem that Europe is really doing badly with deflation looming around the region which caught up to Italy, Spain and Portugal. Also, government debt seems to be piling up with majority of euro-users with net government debt ratios above the stipulated rate of 60% of output. Unemployment for the Eurozone is 11.5%, while the euro banks are filled with bad debts. Yet on the other side, the Americans seem to be doing better with the implementation of Quantitative Easing (QE). Although not a big fan of QE, perhaps the European Government might just do the same. Well, I guess only time can tell if QE will be able to save Europe (or not). If it does, kudos to Mr. Keynes!

Cheers to a bright future,
Colin