The eurozone is in a technical recession, with GDP at -0. 1% in the first quarter. It may be worse.
Russia’s war in Ukraine has packed a blow in Europe with the costs and power shortages leading to shuttered factories and steel. But the worst-case scenarios for markets have never taken their position exactly as the Bear affair was presumed.
“Investors missed the market on the indexes running as they did,” says Albert Marko, a partner in Mavarinas Management Group, a Florida-based hedge fund. “European markets caught tailwinds of a falling dollar, beneficial weather keeping natural gas prices away from hyper-inflating and excellent revenue from luxury goods. Just look at the stock charts of luxury brands and you will see how much that sector rallied European markets.”
The consumer price inflation in France declined to 5.1% year-on-year in May 2023, down from 5.9% in April and better than the 5.5% consensus. Germany’s inflation is now 6.1%, its lowest level in 12 months. And UK inflation is in decline but still high at 7.8% as of April.
German Chancellor Olaf Scholz, left, talks to French President Emmanuel Macron, right, prior to a … [+] joint dinner in a restaurant in Potsdam near Berlin, Germany, Tuesday, June 6, 2023. Their country’s unemployment rate is nearly double that of the U.S. (Michael Kappeler/DPA via AP, Pool)
Europe’s inflation rates are all higher than that of Brazil, China, India and Saudi Arabia. Electricity prices are falling in France and Germany but are higher than they were pre-Covid by a factor of three to four, causing the drag on Eurozone GDP.
And that GDP is stagnant.
In number terms, European Union GDP is producing less value than it did in 2021. Its unemployment rate is worse than the U.S. In some countries, it is nearly double that of the U.S. rate.
The unemployment rate in Germany and Belgium is around 5. 6%. France is at 7. 1%. Portugal is at 7. 2%. Spain is now an emerging market. Its unemployment rate is worse than that of Latin American countries, at 13% at the end of the first quarter.
The US unemployment rate was 3. 7% in May. Colombia has 10% unemployment.
In a recently published report, the World Bank said there is now a “cost of living” crisis in Europe. The Guardian led with this in its headline today about the negative growth rate in the eurozone.
The war in Ukraine has largely contributed to the crisis with the influx of refugees into failing states like Romania, the running out of reasonable fuel, and the loss of Russian markets.
European countries responded to this crisis with social assistance and subsidies, which involved moratoriums on energy price increases, reduced public transport fees, and caps on electricity and natural gas prices for households and businesses. Poorer EU members like Slovakia, Slovenia have had it tougher, with higher inflation leading to higher costs of living for the working class there, the report said.
EU inflation in Poland exceeds 13% in May and unemployment is around 5%. It has been one of the countries hardest hit by the influx of Ukrainian migrants fleeing war, according to the International Rescue Committee. Some 12 million refugees have crossed the Polish border since February 24, 2022 into all of Europe, and 1. 5 million remain in Poland.
“In terms of the outlook for Europe, I don’t see a lot of smart coming from there,” said Vlad Signorelli, head of Bretton Woods Research. “The European Central Bank will raise rates again. As far as the NATO blockade is concerned, I, I can’t think of any EU member country other than Hungary that says, ‘Let’s prevent sanctions and get this war,'” Signorelli says. Hungary’s control has been asking for it since July 2022. Russian sanctions are not being executed as advertised. “says Signorelli.
However, the EU is in the eleventh circular of sanctions against Russia. Greece has reportedly joined Hungary and has lately opposed additional sanctions, Politico Europe reported on May 26.
German philosopher Oswald Spengler, writing in his classic takedown of Europe’s leaders titled “The Decline of the West” during World War I, said if Europe fails to build its own policy based on its citizen’s shared prosperity and economic security, risks of wars and civil unrest will ensue. Ukraine isn’t exactly in the EU, but it is part of Europe and on the EU’s doorstep. It is exacting a high price on Europe, surely more than what the war’s main cheerleader outside of Moscow – the United States – has had to pay.
Since the Covid crisis, Europe has gone into high gear in reinventing itself. Brussels is rebuilding four sectors of the EU-wide economy by promoting policies focused on climate change. This has led to high energy costs, negatively affected the production of food and traditional energy, and is rapidly changing the mighty auto industry. In April, the EU was the first to approve a carbon tax on imports to compensate for fossil fuel use in manufactured goods. The European consumers will foot the bill.
Then there is the EU sustainable corporate governance initiative, which would require European corporations to ensure that EU’s social and human rights criteria apply their origin chain. In Germany, they now consider 150 corporations, however, this number is expected to build up to 15,000. Many European corporations oppose measures, saying that they make it more difficult to compete with foreign brands that are not the subject of similar regulatory limitations.
As Europe’s largest producing country, Germany paid a high price for the destruction of the Nord Stream pipeline in September 2022, but also for its own resolve to prevent fuel and oil from reaching Russia. Now, with the ecological push they are giving, the German auto parts industry will go in the direction of the dinosaur, as electric cars will require fewer portions. (But Mercedes Benz in India will continue to make cars with internal fuel engines, as if India is on another planet). Additionally, the United States provides subsidies to BMW and Mercedes Benz EVS if they are manufactured and sold in the United States.
“In Europe, there are still fears that a new economic architecture designed in Washington will inevitably promote American manufacturers and workers,” Gideon Rachman wrote in an FT editorial on June 5.
George Friedman, geopolitical forecaster and founder of Geopolitical Futures, a publication that analyzes the course of global events, believes it is an exaggeration to say that Europe is getting on the wrong foot.
“Surround your foot and pretend to be agony, that’s more,” he says. The primary war is getting rid of the house and is a component of it. And in times of war, shooting yourself in the foot is a minor injury, “he says, and adds that the European economy has been very worried in war.
Women in the UE. La EU Commissioner Ursula von der Leyen (l) is in line with the US to keep Thearray. [] The war in Ukraine until Russia leaves the country and Christine Lagarde, head of the European Central Bank, at a combat inflation rate, which is worse than some primary emerging markets (Kai Pfaffenbach/Pool AP)
German Chancellor Olaf Scholz was booed by constituents recently, called a “war monger” as he grew increasingly angry, shaking fists and raised voice and all. He looked like a mad leader in a World War II documentary.
“It is very difficult to replace your opinion on issues such as food or energy security, because the security of your company depends on it,” says Ivan Kłyszcz, Russian foreign policy analyst at the International Defense and Security Center of Estonia. about war fatigue in Ukraine in Euronews last March.
On February 10, the progressive alliance of democrats in the European parliament held an occasion called “Feeding Europe in Times of Crisis” where they blamed the EU’s so-called “farm-to-farm” green deal strategy for putting strain on food production and causing food. Costs to increase. Some of the objectives of this programme have to make 25% of EU organic fertilisers agricultural and nitrogen reduction through 20% by 2030. It would take incentives and a massive propaganda crusade to get other people to take animal protein at least 20% and milk intake at about 10%. For soybean farmers in Brazil and the United States, in addition to soybean imports to Europe if that policy has legs.
European corporations are mobilizing against those policies related to weather change. Last year, Italy ordered to pay more than €190 million to British oil and feed corporate Rockhopper over the Italian government’s refusal to grant an offshore oil concession to combat weather change.
The European Union was mainly created to serve the economic expansion of the Member States. Its origin dates back to the “European Coal and Steel Community”, established in 1951. The precedence of economic expansion has allowed Europe to reach a phenomenal wealth just a few years after a great war. This finally led to the creation of the EU in its current form.
But now the EU is more an extension of the political systems presented last year by figures such as Davos Man at the World Economic Forum. Is Europe still a growth story? Few would say so, despite the buildup at Dax and CAC.
The EU has been in a constant state of crisis and disorder from the piigs crisis (Portugal, Italy, Ireland, Greece, Spain) in 2009, which focused in all likelihood on the exit of Greece from the EU; Then, the United Kingdom, which advances and is in “Brexit”; Then came the restrictions and needs in the Chinese style; And now the war in Ukraine.
It is true that belief is greater than truth, but the truth here also suggests a popular reversal opposite to the prestige quo.
A building in Euro-Skeptical matches and right-wing nationalist parties in France, Hungary and Italy is making the spirit of political team guided through Brussels incredibly difficult. The Alternative Party Fur Deutschland (AFD) now obtains approximately 30% in the surveys after years after years. of being called through fans on the right due to their neo -Nazi wing.
As the war in Ukraine continues, more countries outside of Europe are calling for an end to it. This will pressure Brussels, even if their policies are hand in hand with Washington.
Some recent headlines here should be seen as a signal of greater “war fatigue”.
For sure, an end to the war in Ukraine will be great for Europe. It is unclear if the markets are pricing that in already, given how far ahead the DAX is to the Dow. Even the FTSE Europe was up on Thursday morning despite the poor GDP news.
“Subsidies, rationing and other strategies of economic suppression have allowed Europe to suffer from an energy crisis and inflation,” Marko says of the EU economy and stock market. “It’s not sustainable. “
The last laugh. Year-to-date, investors have done better in the recessionary, low to no growth EU … [+] than in the U.S. despite lower inflation here and a much stronger job market.
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