CHICAGO, May 7 (Reuters) – If this weekend’s elections in
France and Greece do nothing else then they should remind
investors that these are individual countries, despite being
members of the euro zone. The 17 current countries in the
currency bloc might have thrown in their lot together in an
economic sense, but for investing purposes, you don’t want to
treat the members – and surrounding countries that are waiting
to join – as a single entity.
I break up the continent into four distinct blocks that have
nothing to do with geography, but instead with economic risk
profile and political dynamics.
JUST LIKE US
I consider Portugal, Ireland, Italy, Greece and Spain to be
“Yankee” Europe. Although their fiscal problems are all slightly
different from each other, these countries all over-borrowed or
got nailed by a housing bubble, emulating American missteps.
Most have imposed devastating austerity measures that are
roiling their political systems and triggered double-digit
unemployment. Their short-term prognosis has been sour.
Investors have been selling shares of Yankee Europe of late.
Spain has led the list of losers with a 14.4 percent loss in the
iShares MSCI Spain Index Fund. Italy hasn’t been hit as
hard, with a 0.36 percent loss in the iShares MSCI Italy Index
exchange-traded fund. All returns are year-to-date
through April 30, compiled by Lipper, a Thomson Reuters company.
The one exception in the Yankee group could be Ireland,
where there’s a hint of a turnaround. The iShares MSCI Ireland
Capped Investable Index, rose 17.4 percent in the
period. Several Irish-based companies such as Elan, a
biotech firm, have growth prospects in global markets, so the
Emerald Isle is worth watching as a rebound candidate.