Europe is at a precipice, as voters across the Continent have shown they are fed up with the existing political order and its prescription of austerity.
France's conservative government, led by Nicolas Sarkozy, was thrown out of power two weeks ago by Francois Hollande's left-leaning Socialist Party. Over the weekend, Angela Merkel's center-right Christian Democratic Union suffered its worst defeat in local elections since World War II. And Greece appears to be headed for a fresh general election, as its fractious political parties seem incapable of forming a coalition government.
For the first time, European leaders are even talking openly about a fissure in the Continent's monetary union. Belgium's central bank governor told the Financial Times: "I guess an amicable divorce -- if that was ever needed -- would be possible, but I would still regret it." And his Irish counterpart echoed the sentiment: "Things can happen that are not imagined in the treaties ... [but a Greek exit] can be managed ... It is not necessarily fatal, but it is not attractive."
The significance of such an eventuality cannot be overstated. If the monetary union fractures, an epidemic of currency devaluations will almost certainly ensue, causing American-made goods to increase in price on a relative basis, thereby driving down the Continent's demand for them. As a result, the biggest impact will be felt by American companies with considerable exposure to European markets.
For investors, a company's geographic footprint will be crucial to watch. Below is a look at the five Dow Jones Industrial Average (INDEX: ^DJI ) components that collect a considerable portion of their sales from across the pond.
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|DuPont (NYSE: DD )||29%*||$48||Add|
|3M (NYSE: MMM )||24%*||$60||Add|
|Caterpillar (NYSE: CAT )||22%**||$62||Add|
|General Electric (NYSE: GE )||20%||$198||Add|
Sources: All geographic sales figures other than DuPont's and Caterpillar's are from the respective companies' most recent annual reports. DuPont's and Caterpillar's are from the companies' most recent quarterly report. Market cap data is from Yahoo! Finance. *Includes sales to Europe, Middle East, and Africa. **Mining revenues excluded.
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