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Should We Be More Worried About Europe?

Everyone talks some big talk about Europe over here — especially since the continent has been blamed for earnings slowdowns in companies from Ford (NYSE:F), which pointed the finger at the EU downturn for a recent $1 billion loss, to Cisco (NASDAQ:CSCO), which warned about Europe softness as early as May.

So it’s no surprise that in a recent survey from Sage North America (and fancy accompanying infographic), the biggest source of European pessimism was coming from the continent itself. The CEOs who are actually living and working amid the mayhem — in both embattled nations like Portugal, Spain and Ireland, and stronger EU states like Germany and France — are almost unanimous in their feeling that the EU crisis has sapped optimism.

Sage North America’s global survey on business prospects covered a lot of ground, and generally, business owners are slightly more optimistic on a global level, but slightly more pessimistic in the U.S.

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But get a load of this breakdown by country on the specific question of whether the eurozone debt crisis and recession is a big cause for concern. I mean, a mere 4% in Portugal and Spain said they were unaffected. Not a surprise, but very telling …

Especially when juxtaposed with a mere 38% of American CEOs who see Europe as a weight on their confidence, the second-lowest to Canada’s 35%.

Why is that number so low? Is the posturing from Ford and Cisco just excuses? Or are the rest of our business leaders just being naive and self-centered without understanding the global implications of this mess?

There’s a few ways you can parse this data:

The first connection is to simply say that Europe is much more attuned to Europe than we myopic Americans are. So they might indeed have a better grasp on the politics and economics of the situation and we should all take notice — and prepare accordingly.

The second option is to say that Spain and Portugal are of course the most affected. I’m sure American International Group (NYSE:AIG) and General Motors (NYSE:GM) were the ones worried most about the financial downturn when compared with stronger companies in less-affected sectors. So why let these ne’er-do-wells tip the scales toward crisis just because they are out of luck?

The third and more complicated response is that the EU is too much of a mess for anyone to figure out. It has been flailing for years to keep member states’ debts under control, but debts are crippling and economic collapse sparks regular riots there as Greece enters a staggering sixth year of recession. The continent alternately has swung between rescue and ruin a dozen times in the last 18 months … so frankly, who cares what the flavor of the month is in this report? American CEOs are focused on opportunities here and elsewhere in the world, so Europe isn’t necessarily as big of a deal no matter what.

Any way you slice it, it’s an interesting little survey.

Check out a much larger and in-depth infographic here based on the Sage survey, and check out the survey’s details on Sage’s website.

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Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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