Two Ways Europe is in Trouble

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EU Car Sales Slump – WSJ.com.

European car market plunges to lowest since 1995 | Reuters.

The story of the European automobile industry shows two reasons why the continent is in trouble.

Sliding auto registrations illustrate the plight of the European consumer. Unemployment rates approaching 12% have a taken a bite out of consumer spending forcing the French car companies to the verge of bankruptcy.

However, not all European automobile companies are doing poorly. The German companies, the Volkswagen group and BMW, are posted increased sales on the back of exports to the U.S. and China. Hyundai and Kia have increased their European business by over 20% in the past year.

Germany is competitive in world auto markets, but France is not. Twenty years ago, the decreased demand for French industrial production would have reduced the demand for and price of the franc helping to stabilize things. Today, France is loaning its car companies lots of taxpayer money to keep dying companies afloat and French workers employed.

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