The real European issue

I have been writing at least since 2003 that the difference in productivity among the European countries is the main reason for the failure of their union.

This chart (click on the chart to enlarge it) shows the difference in unit labor costs (labor costs adjusted for the productivity of each country) of several European countries (Source: Macronomics). The countries in trouble have high unit labor costs.

High unit labor costs reflect low productivity. Which translates into trade deficits. Which translates into financial problems for the country. The same analysis, by the way, applies to the states in the US and the US as a country in the world economy. The size of the problems of any country/state depends on its level of productivity.

Again, the European problems derive from the huge productivity differentials between countries. No central bank in this world can fix this problem.

More details in my The Peter Dag Portfolio , in Dag's Exclusive Market Alert, and my free educational videos on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

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