It is possible that some of the structural problems of the European economy (economies) may actually give them something of a buffer for the current difficulties.  Here’s why:

1.  Money under the mattress:  A great deal of money is hidden from tax authorities (legally or illegally), which the Europeans have for centuries saved for a rainy day.  Financial hurricanes count as rainy days.  The mattress is metaphorical in that much of it resides with private banks.  Although they have taken their portfolio licks, they are also sources for capital for doing some interesting deals in acquiring companies, e.g., here in Italy.

2.  No small business lending:  Small business lending, as it is known in the US, essentially does not exist.  This is a bad thing for innovation and economic growth but in downturns a good thing:  less indebtedness.

The third reason is not so much a structural flaw as a difference:  People have (near) universal health insurance.  Whether or not you (or I) like it is not the point.  The point is that people are not going bankrupt because of uninsured medical conditions–and they are going to the doctors.

Food for thought.

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European economy

December 2008

If street traffic in Milan’s fashion district is any indication, the meltdown is reaching Via Montenapoleone. Even the Russians–ever reliable buyers–seem to have moved elsewhere. Of course, it has not helped that we have three weeks of rain. On the other side of my world, I heard that Malibu got snow.