How the European Woes Affect All of Us

Over the last few weeks, Greece and the so - called PIIGs countries of Europe have been under the spotlight. Let us examine what is the European Union, why the debts of certain member countries are a threat to all and the way going forward.
The roots of the European Union can be traced to the period after the Second World War and the rebuilding of Europe. For those who are interested in reading further, wiki has interesting nuggets:
http://en.wikipedia.org/wiki/European_Union
The EU has a membership of about 27 nations. It is somewhat like Federal Structure of India where weak states are subsidized by the stronger states. This is the reason why in India, the so-called BiMaRu belt ( Bihar, Madhya Pradesh and UP) even if they were not doing well earlier, the other states made up for it.
Now, Greece, Spain, Italy, Ireland and Portugal have ran up huge debts mainly due to lack of earnings and huge spending.
The confidence in Greece's ability to pay up led a run on their bonds (debt). No one was willing to lend to Greece as they thought in case of a default, the institutions issuing the debt would loose their money.
If there was no Euro, and the Greece Drachma, the problem would have been limited to Greece, there would have been sympathetic noises made and the world would have moved on. Greece is part of the EU and has the currency Euro.EU cannot allow its member nation to fail in debt obligations, because that would mean the end of the Euro and the EU. No one would trust the Euro anymore.
The problem further stems from the fact, that the stronger countries like Germany were not too willing to bail out Greece. The reason? Taxpayers of Germany feel why should the Greeks party and we pay the bill for the party.
The same situation prevails in the other PIIGs nation. The following image got from the web, shows the magnitude of the debt.
The problem with the EU and the Euro is that it is an artificial nation and currency created without clear cut mechanisms, to cut fiscal deficits.
Now, how would this EU crisis affect other nations:
1. EU has 21% of the World's GDP. It is the largest trading partner to the countries like China and India.
2. A weak Euro hurts exports from India to EU.The margins get hit. If there is less demand in EU, the exports get hit anyway. Prime example our Automakers namely Maruti and Hyundai exports big volumes of cars to EU.
3. The Dollar Index has already moved up to 86 from 74. A strong Dollar means the end of the Dollar Carry Trade and the hot money moves out from the Emerging Economies and moves back to the US.

The next few months and how the EU crisis pans out will show us where our markets will go.
To think of it, it was only in last year where the talk was that that the Euro would replace the USD as the world's premier currency.