The Light Bulb Moment for the Eurozone

EWI's free EU debt report sheds some light on what's in store

December 8, 2011

By Elliott Wave International


How many European bankers does it take to change a light bulb? That's a joke in search of an answer, but EWI's European analyst Brian Whitmer explained five months ago that the "light bulb moment" was coming -- that's the time when most people would clearly recognize the severity of the European debt crisis. He offered this spot-on analysis back in July 2011, before the larger world came to know recently how bad things really are in the eurozone.

This chart shows how markets in Greece, Ireland and Portugal have behaved over the past five years, including the bailouts. Whitmer says that the turmoil in Greece is due mostly to both social mood and Greek markets having plummeted for more than a year and a half, while the larger EU stock markets have levitated. Once they turn down, he forecasts that what you saw in Greece will be replayed in the eurozone.

To help his subscribers see the light and get the full picture, he compared EU member nations under financial scrutiny to those that are usually viewed as being safe -- and showed that they weren't as safe as most people thought.

Specifically, Whitmer warned that the debt per person in Greece looked eerily similar to the debt per person in highly regarded countries, such as Germany and France -- and even to non-eurozone countries, such as the United Kingdom.

In 2010, Britain proposed a five-year, 25% budget reduction that affects nearly every area of the government. While it sounds like a drastic measure, it has played out differently during the past year. According to member of European Parliament Daniel Hannan, statistics show that not only is government spending and borrowing significantly higher than this time last year, but taxes, too, are way up. Whitmer notes that the budget cuts rely heavily on the future and lack near-term bite.

Why has the worst of Europe's violence taken place on the streets of Athens rather than London? Athenians did not suddenly grow more violent in 2011. What has changed since 2007 is their stock market. Whitmer's words of advice: "...should your country's stock market begin to look like Greece's, watch out. Trouble will be on the way."

European Financial Forecast Editor Brian Whitmer has covered Europe's debt crisis since March 2010 -- and his forecasts kept subscribers ahead of the downward spiral every step of the way. Read more of his analysis in our free report, "The European Debt Crisis and Your Investments."

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