She is absolutely right

CNBC: Chancellor Angela Merkel said on Tuesday that Europe could only hope to come out of its crisis stronger and compete in a globalised world if its members pressed ahead with painful reforms and moved to more responsible budget policies.

The only way to save the Euro is to improve the competitiveness of the Southern countries. The issue is not their debt or the level of interest rates. They need cultural and structural changes almost impossible to achieve.

A good indicator to follow is the current account balance of each country. The countries in trouble have a huge current account deficit.

Germany has a current account surplus much bigger than that of China. In other words, Germany global competitiveness is much higher than that of China.

The reason for the strength of the Euro is that the northern European countries have a substantial current account surplus while the US has a huge current account deficit.

These data can be found in The Economist.

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

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