Shock Waves Hit the Global Economy, Posing Grave Risk to Europe
The threat to Europe’s industrial power and living standards is particularly acute as policy makers seek to cut off the continent from Russia’s energy sources.카지노사이트
Russia’s invasion of Ukraine and the effects of the protracted pandemic have unsettled nations around the world, but a relentless series of crises hit Europe hardest, with sharp rises in energy prices, some of the highest inflation, poses the greatest risk of recession. .
The consequences of the war threaten the continent with fears of what could be the worst economic and financial crisis in decades.
Neil Shearing, group chief economist at Capital Economics, said growth was slowing globally, but “worse across Europe as it’s driven by a more fundamental downturn.” rice field. Real incomes and living standards are declining, he added. “Europe and Britain are just getting worse.”
How steep the challenge was was clearly underscored on Thursday. The European Central Bank, which oversees the economic policies of 19 countries that use the euro, has taken aggressive steps to combat inflation, delivering a record three-quarters percentage point rate hike. At the same time, it acknowledged the serious impact of the energy crisis and issued tough growth forecasts. “It’s a very bleak downside scenario,” ECB President Christine Lagarde told a news conference.
European Union ministers will meet on Friday to discuss plans to intervene in energy markets to keep prices down. They discuss possible strategies including price caps and mandatory reductions in energy consumption.
Several countries, including Germany, the region’s largest economy, have relied on Russian energy for decades. The eight-fold rise in natural gas prices since the start of the war poses a historic threat to Europe’s industrial strength, living standards, and social peace and cohesion. Plans are being developed for factory closures, rolling blackouts, and distribution. winter.
Ian Goldin, professor of globalization and development at the University of Oxford, said the risks of falling incomes, rising inequalities and rising social tensions are “not just fragmenting societies, but fragmenting the world.” We may be connected,” he said. “It hasn’t been like this since the 1970s, and it’s not going to end anytime soon.”
Other parts of the world are also under pressure, although some of the causes and prospects are different.
Interest rate hikes, aggressively used to curb inflation, are dampening US consumer spending and growth. Still, the US job market remains strong and the economy is moving forward.
A powerful engine of global growth and an important market for European exports such as cars, machinery and food, China faces its own set of challenges. Beijing’s policy to keep all activity frozen during the Covid-19 outbreak has repeatedly paralyzed large parts of the economy and led to disruptions to global supply chains.In the past few weeks alone, dozens of Cities and over 300 million people are under full or partial lockdown. Extreme heat and drought have paralyzed hydroelectric power, closing more factories and causing power outages.
The choppy real estate market has contributed to the destabilization of China’s economy. Hundreds of thousands of people are refusing to pay their mortgages. This is because developers have lost confidence in providing unfinished housing units. Trade with the rest of the world took a hit in August, and although overall economic growth is likely to outpace that of the US and Europe, it appears to have fallen to its slowest pace in a decade this year. increase. The outlook has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.
“The global economy is definitely slowing,” said Gregory Daco, chief economist at global consulting firm EY-Parthenon, but “moving at a different speed.”
Elsewhere in the world, countries that can supply essential materials and commodities, especially energy producers in the Middle East and North Africa, have turned in better-than-expected gains.
India and Indonesia are also growing faster than expected as domestic demand increases and multinationals seek to diversify their supply chains. Vietnam also benefits from the fact that manufacturers are relocating operations to the Vietnamese coast.
Yet China, the Eurozone and the United States together account for about two-thirds of global economic activity, and if all of these giants slowed, it would be difficult for any country to insulate itself from the impact. increase.
Poor people, who spend most of their gross income on food and energy, will be hit hardest.
Cold living rooms, closed production lines and wonders this week after Russia’s state-owned energy company Gazprom said it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted sanctions. Fears of global energy bills intensified in Europe. Ukraine has been removed.바카라사이트
Some European leaders believe Russia’s attempt to use gas exports as a bargaining chip will result in diminishing returns. European Union countries have actively sought alternative energy sources, reducing their dependence on Russia while accumulating reserves to survive the winter. But few believe the economy will be pain free. According to Rystad Energy, average daily electricity costs in Western Europe have reached record levels, surpassing €600 ($599) per MWh in Germany and rising to €700 in France. , with a peak rate of up to 1,500 euros.
In the Czech Republic, some 70,000 angry protesters with ties to far-right groups gathered in Prague’s Wenceslas Square last weekend to demonstrate against rising energy costs.
Governments in Germany, France and Finland have already stepped in to save domestic energy companies from bankruptcy. Nevertheless, Germany-based Uniper, one of Europe’s largest buyers and suppliers of natural gas, said last week that price hikes cost him more than 100 million euros a day. said. In recent days, Germany, Sweden, France and the UK have announced billions of dollars in aid programs, as well as distribution and conservation schemes to help save households and businesses.
The cost of all these measures will be enormous at a time when the national debt is already enormous. Concerns about dangerously high levels of debt prompted the International Monetary Fund this week to present a proposal to reform the European Union’s framework for public spending and budget deficits.
But the unforgiving, unshakable reality remains. It is that countries lack energy to spare.
At current prices, it produces steel, wood, microchips, glass, cotton, plastic, chemicals, and electricity that are used to make food, heating, garage doors, tampons, bicycles, baby food, wine glasses, and more. is not enough. more than consumers want.
The roots of the shortage predate the war in Ukraine.
Sven Smit, senior partner at consulting firm McKinsey & Company, said commodity prices began to rise in 2020 as countries began to ease pandemic restrictions. In the United States alone, a consumer actually bought $1 trillion more goods than he expected, based on spending patterns before the coronavirus outbreak. And the sudden shift in spending to products like new kitchen tiles and cars, rather than services like restaurants and entertainment, has compounded the problem by requiring more energy and materials to make them. I was.
Sumit said there are more “depleted supply chains” than broken ones. “This is a physical crisis, not a psychological crisis,” unlike what most people remember.
Mr Sumit once said, “I was frightened by something and stopped spending, but I got more comfortable and the spending came back.” “It’s not what’s happening now. To solve this mystery, you must recover supplies. ”
This conundrum is compounded by the need to produce energy that is not only readily available and affordable, but does not exacerbate the devastating climate change that is already threatening our planet.
Achieving this goal will take years, not months.
In the short term, capping energy prices could bring relief to struggling households and businesses, but economists worry it will weaken incentives to reduce energy use.
Western central banks are expected to continue raising interest rates to make borrowing more expensive and keep inflation in check. After the European Central Bank decided to raise rates on Thursday, the US Federal Reserve is likely to do the same at its meeting later this month. The Bank of England takes a similar position.
The concern is that downward pressure on prices will increase and the economy will plunge into recession. Rising interest rates alone will not bring oil and gas prices down – unless the economy collapses badly and demand falls sharply. Many analysts are already predicting a recession for Germany, Italy and the rest of the Eurozone by the end of the year. For poor and emerging economies, higher interest rates mean more debt, leaving less money for the most vulnerable.
Professor Goldin of the University of Oxford said: “I believe we are experiencing the greatest development disaster in history, with more people than ever before pushed into extreme poverty. “This is a particularly dangerous time for the global economy.”온라인카지노