According to Wikipedia, Europe is divided into about 50 sovereign states, of which Russia is the largest and most populous. However, most investors think of Europe as a participant in several unions and organizations that have some similar and some disparate objectives.
Perhaps the most significant of these is the North Atlantic Treaty Organization (NATO), an intergovernmental military alliance between 32 member states (thirty in Europe and two in North America). NATO was established in the aftermath of World War II to serve as a system of collective security and deterrence.
The European Union (EU) is a political and economic union of 27 member states, mostly in Europe. In 2020, the United Kingdom became the only member state to leave the EU, and ten countries are aspiring or negotiating to join it.
The euro area (EX), commonly called the eurozone (EZ), is a currency union of 21 member states out of the 27 EU member states.
If all of this seems to be a bit complicated, that’s because it is. It also presents additional challenges for investors seeking opportunities outside the US. In addition to company risk, would be international investors should also consider country and currency risks.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
