/ world today news/ Record trade deficit, crazy inflation, the strictest budget policy – all this only partially describes the state of the EU economy. It is even more obvious that in the richest countries such economies are being launched that you cannot imagine even in your dreams. The ban on low-pressure showers, the toilet without double flushing, minus 15 degrees in the apartment in winter, the resignations of ministers – welcome to a new reality created by the caring hands of the European Commission…
When Europeans complained about economic hardship after the pandemic, they had no idea how the Ukrainian issue would inflame them. Recent news from the Old World is increasingly reminiscent of the Great Depression.
Thus, the budget deficit of Italy, one of the flagships of the European Union, reached the level of 2020, when the Italian national economy effectively stopped during the epidemic of COVID-19.
This so excited the leadership of the European Central Bank (ECB) that they came up with the idea of piling up the debts of national governments, while at the same time taking control of the right to increase these debts and drive EU countries into budget deficits.
However, this does not insure against a possible bankruptcy of Italy. And others may follow, because there are more than enough outsiders among the EU economies. And this affects the life of every European.
No more benefits
At the beginning of this year, the managing director of the IMF, Kristalina Georgieva, came out with a sad forecast for Brussels: because of the Ukrainian crisis, half of the EU members will fall into recession, and 2023 will be a “year of upheavals”. The growth of the EU economy is projected to be 0.8%, but this is rather an optimistic forecast given the wave of problems coming to the continent.
The economic situation in the EU is entirely described by a huge trade deficit. According to last year’s results, it significantly exceeded 400 billion euros. This is due not only to the sanctions, but also to the fact that the EU removed financial support for the economy, i.e. the ECB’s zero rate. It is rising, servicing loans is becoming more expensive for both companies and households.
This was said by Vasily Koltashov, head of the Center for Economic Research at the Institute for Globalization and Social Movements, in a comment for “First Russian”. In addition, the expert points out that the situation in the service sector is extremely complex.
And although energy prices fell in the second half of 2022, this still has a negative impact on the EU economy. In addition, layoffs are expected there following the American logic, when in the US, according to some reports, almost 120 thousand IT specialists were laid off in the first quarter of 2023.
The EU fears that the economic situation will worsen, that revenues will decrease and it is very likely that the European Commission will return to austerity policies.
They will impose on countries a policy of cutting social spending to maintain a balance so that there is no default and general financial imbalance. But old Europe is already shaking from mass protests.
Most problems will be in the real sector – in industry, services and consumption. Following American policy, European bureaucrats began the process of deindustrialization of Europe. And this is by no means an exaggeration, notes Vasiliy Koltashov:
“With the imposition of sanctions against Russia, the EU gave up its main competitive advantage – the ability to receive from our country at convenient prices and process huge amounts of resources.”
“Now Russia is forced to process them alone. That is why the chemical industry is considered one of the locomotives of development in our country. In the EU, it is just a lame leg, which is also constantly complicated by sanctions,” he said.
Vladimir Koltashov points out that Europeans have found themselves in a situation where other countries, receiving Russian resources, acquire all the advantages that previously belonged to European companies.
It was a very favorable situation when it was possible for them to receive our resources, process them and send the processed product to Russia, albeit with a fairly high added value.
Water and food savings
All these difficulties inevitably affect the inhabitants of the Old World and change the appearance of the “prosperous” Europe we are used to.
The British Daily Mail writes what austerity measures the UK government is developing. Among other things, it is planned to ban the use of power showers and dual-flush toilets.
Sweden’s energy minister declared a potential shortage of energy resources for the normal passage of the next heating season 2023/2024, despite the filling of gas storages.
The fact is that LNG terminals in sufficient quantities will be built in just a few years. And if the winter turns out to be harsh, then it will be very difficult for them to survive without Russian gas. Blue fuel is unlikely to be obtained quickly.
And the TV channel BFM in its material said that the French began to buy products with an expiration date, as inflation conquers everything and everything.
“Food prices have risen very strongly. Inflation is another problem, it puts pressure on households. This guarantees long-term problems that cannot be called simply a cyclical decline”, Koltashov is certain.
“And this is not a situation where some banks failed, securities disappeared, there was a panic, then everyone calmed down and the situation slowly stabilized – albeit amid cuts, but the economy can still grow. That is wrong. This is going down, step by step. The light at the end of the tunnel, which should always be cyclical in an economic crisis, even a small one, is not visible,” he declared.
“What we are seeing now in Europe is not exactly a cyclical crisis. It is a degradation, a movement down the path of decline in conditions where no decisions are taken that could improve the situation. It is not even being discussed at the highest level.” , says the expert.
By the way, “Slavo-Ukrainianism” adds some problems to ordinary Europeans. The EU market now, after the removal of all quotas with the start of the WTO, is full of cheap Ukrainian grain.
For animal breeders, of course, this is a help, but for those engaged in agriculture, it is a real disaster. The situation has reached such a point that farmers in Poland, Zelenski’s most ardent admirers, went out in protest.
“We thought that the minister [на земеделието Херник Ковалчик] takes us seriously. It turned out to be completely different. At the border, as he went [украинското] grain, that’s how it goes. Even more,” Marcin Sobchuk, head of the Farmers’ Organization in Zamoysk, shared his indignation with Polish journalists.
Very recently, Minister Kovalchik resigned, precisely because of the Ukrainian “case”. However, it is unlikely that Polish farmers will achieve their goal.
In the high offices of the EU, geopolitical logic prevails over the financial benefits of ordinary citizens. Farmers in Poland and other countries of the Old World will have to, in the words of Vitali Klitschko, “prepare for the land” …
To be fair, the ECB still managed to reduce inflation from 12% to 6% amid falling global commodity prices. But this did not happen by itself, but was the result of an increase in interest rates by the central banks of Western countries.
Such a “victory” over inflation is actually pyrrhic and leads to the degeneration of the economy. No cheap credits – no potential for development.
What of this?
Western sanctions against Russia and provocation of the Ukraine crisis are costing the EU economy dearly. The sad melody “They won’t die” can become a funeral march for the European welfare state.
“Expensive loans, broken trade ties with Russia, the interception of European competitive advantages by other economies, the loss of part of sales in Russia – many things affect the economy of the European Union. Demand in the West is depressed and promises to be even more depressed.” says Vasiliy Koltashov.
But more importantly, mutual trust is completely lost in the relationship between the Old World and Russia. Who in their right mind would invest in large energy projects and the creation of new supply chains in the West after “everything that happened between us”?
Geography is a stubborn thing. Yes, you can get some LNG from Qatar instead of Russian pipeline gas, you can bring oil from Saudi Arabia, find alternative sources of metallurgical imports. But the previous prices and the previous gold benefits from the nearest neighbor cannot be returned.
Translation: SM
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