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The Unbalanced EU

May 26, 2011 11:44 am
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The Unbalanced EU

The European Union is unbalanced. At its core are two economies chugging along at a modest pace, while at its periphery are a handful of countries suffering from civil unrest and the potential of a government default.

Bank of France’s Governor Christian Noyer said that full-year growth for the country’s economy could be “at least 2%” according to Market News International.

France’s GDP grew by 1% in the first quarter, and is anticipated to grow 0.5% in the second quarter.

As if to prevent France from following the path of its southern neighbors, Noyer went further, emphasizing France’s commitment to reduce its budget deficit to less than 3% of GDP by 2013 and to balance the budget as soon as possible.

According to The Wall Street Journal, Angela Merkel, Germany’s Chancellor, predicted that Germany would see GDP growth this year approaching 3%.

Consumer confidence is up in France, while Germany has seen its business confidence remain high.

Contrast that with the economic suffering experienced in Spain and Greece.

Spain has been suffering from high unemployment since the financial crisis and recent riots have erupted in Spanish streets. The ruling party of the Spanish government suffered a major defeat in local elections Sunday.

Greece may be struggling more than any other European nation. The economic situation has gotten bad enough to prompt a Greek EU official to raise the possibility of Greece’s exit from the Euro Zone.

Which direction will the EU go in?

Traders expecting the economic strength of Germany and France to pull the struggling EU through might consider a long euro play such as WisdomTree Dreyfus Euro ETF (NYSE: EU).

Other traders who believe that the debt problems of countries such as Spain and Greece will doom the union may consider ProShares UltraShort Euro (NYSE: EUO).

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