The Eurozone Crisis and Singapore

This article is contributed by Bullion Vault.


The Eurozone crisis may be several thousand miles away in geographical terms, but when we account for the globalised financial markets this is vast distance may not be enough to shield us from the problems in Europe. The size of the economies of the Eurozone, the importance of trade to Singapore and the scale and nature of the problem in Europe all contribute to the impending doom.

Firstly, although the USA might be the world economic giant at the moment, with a gross domestic product of $10,882 bn (according to World Bank figures from 2003), the richest 12 European countries have a domestic product of $8,175 bn. Let us compare this to Japan at $4,326 bn (with a far lower population however) and China $1,410 bn. So, to misquote the popular phrase from the UK ‘When Europe sneezes, the rest of the world catches a cold’ (the original phrase was ‘when America sneezes, the UK catches a cold).

When many investors are wondering how much we should invest in gold, it is relevant that a report the Asian Development Bank (ADB) noted that Singapore and Hong Kong are the ‘most sensitive’ of any Asian region to any financial downturn in Europe. This is ‘because of their exposure in both the real and financial sectors’ according to the head of the ADB’s Office of Regional Economic Integration, Iwan Aziz. This will mean that growth is likely to fall from the high of 9.4 % in 2010 to 7.5 % 2011 and a mere 7.2 % in 2012. Singapore exports more to the eurozone than any other European nation, with Hong Kong shortly behind at 14.5%.

If you were wondering how the financial crisis in the Eurozone is moving, according to Chinese economist Andy Xie, it has changed from being primarily a financial crisis to a political crisis. Speaking at the TradeTech Asia in Singapore in December, Mr Xie put it like this: the European lifestyle is not sustainable, they need to work more and spend less.

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