Sergio Marchionne, the chief executive officer of automakers Chrysler and Fiat, was speaking to reporters recently and said something about the economic challenges in Europe that caught my attention. As we've been reading in the news, the concept of European union is at a critical stage. Talking about the looming debt issues, Marchionne made the observation that while both Europe and North America desire unity in their respective regions of the world, they've adopted separate paths towards that end. Europe, faced with many national differences, decided to first establish a strong shared currency (the Euro), hoping that the single currency and its benchmark economic requirements would eventually lead to political union. But those requirements of monetary union and the differences between national economies now risk tearing Europe apart.
Marchionne noted the North American model is different. Canada, the United States and Mexico first negotiated a free trade agreement. They chose to not bind national currencies together. The value of the currencies has been free to float. As a consequence, political union, if desired and possible, could be developed as a separate phase. Countries have been freer to pursue their own policies. Specific national economic issues to date have not been a grave threat to the agreement.
Financial observers say that many of the world's nations have been living too deeply in dept for too long. Now Europe faces significant social and economic upheaval, as Greece is forced to make great sacrifices to enact an austerity plan that threatens its social fabric. The global downturn of 2008-09 may only have been the first phase of a continuing crisis. All eyes are on how the European Union and the world's bankers are tackling the big challenges of this latest financial dilemma.
Der Spiegel magazine offers a detailed portrait of the economic situation in Europe. See Huge National Debts Could Push Eurozone Into Bankruptcy.