An imminent recession: some European examples

Photo by D koi

Economic uncertainty and inflation, coupled with stifle spending and energy blackout, are signalling a looming recession for Europe. PMI surveys are pointing out poor performance in the eurozone, the worst since 2013, without even taking into account the COVID-19 lockdown.

However, deviation across the major European countries clarifies how the impact of different social instances and factors of production can be crucial for the survival of national economies.

The last spurts of growth

The Italian, French and Spanish economies are all slowing down. This is true also for several other countries, whose data of monthly inflation for the month of October were underestimated by analysts.

However, this was not the only surprise for economists. In fact, Germany has unexpectedly shown a 0.3% growth in the last third quarter, mainly driven by consumer spending and even exceeding its pre-pandemic level. The economist Claus Vistesen noted that the German data is boosted by the growth of new car sales in September, rising by 14 percentage points compared with the same month a year ago.

Nevertheless, experts warn not to misinterpret these observations, which seem almost anachronistic given the time being. In fact, the German rate of inflation reached the double-digit mark of 10.9% in September, hitting 11.6% last month, with companies and households adjusting their investment and consumption against the rocketing prices of energy and food.

For Italy, instead, the situation seems quite tense. With the inflation rate jumping from 9.4 to 12.8 percent in one month, the senior analyst Paolo Pizzoli said that the Italian government should speed up a concrete plan of measures aimed at preserving the debacle of the economy.

Data are much similar to those of Spain, whose GDP growth rate slowed down by 1.3 percentage points in the final months of summer. In fact, the magnitude of consumer spending’s drop offset the quite strong resumption of the Spanish tourism sector after two years of restrictions.

The mildest effect of inflation benefits the country less reliant on Russian natural gas, France. Even if the growth rate of the economy stepped from 0.5 to 0.2 percent and inflation rose from 6.2 to 7.1, these changes are undoubtedly less distressing.

Photo by Nataliya Vaitkevich

Why German growth is not persuading

As the economist Claus Vistensen warned us, we should consider the surprising German growth as only circumstantial. In the last period, a strong government opposition is threatening the stability of the political system, when concerning the country’s dependence on China.

The dilemma is whether the acquisition of a stake in a Hamburg container terminal by the Chinese shipping company Cosco would disproportionately favour the critical leverage of this latter with respect to the European transport networks, and hence the German dependence on China.

Photo by TomFisk

With one of the biggest markets for German cars, chemicals and machinery, China frightens the European power when coming to a potential Taiwanese “reunification”. The sanctions in which the country would incur would be likely to alienate it from the Western trade, damaging Germany on many fronts and altering the exchange of raw materials and technologies fundamental for the transition to a carbon-neutral economic activity.

To converge different views on the argument, next year the German government will present a new “China Strategy”, designing with practical terms its ties with the Chinese counterparts.

Moving to the West: the Belgian case

Threatening the trust in the Belgian government, other than the crisis, are thousands of legal complaints for the inefficiency of housing migrants without an Ukrainian passport. These people are mainly male, coming from all over the world, who however are sleeping on the streets even after being registered.

Photo by MART PRODUCTION

The country has attempted to rule the situation together with important law firms by creating a helpdesk, Voyaach, with the aim to grant migrants the possibility to defend their rights in court; nonetheless, the prime minister Alexander De Croo has affirmed that the main problem is the recruitment of staff and other human resources to run and manage a growing number of shelters: this is not a time for big spending. However, Belgium will bear a fine of €1000 for every day the order of providing adequate living conditions for plaintiffs is not met, with an accusation of breaching international and European law.

A quick recap on two of the most recently debated topics: fertilisers and debt burdens

“Trap of Russian narrative”, this is the metaphor through which EU officials have appointed the question of whether the exemption of fertilisers from the Russian sanctions could have reduced the magnitude of the food crisis.

Photo by Ricardo Fernandez

Even if Europe is struggling, no policies are to be expected: the only promised guarantee from member States is an undisrupted fertilisers’ supply to factories, even in the event of gas rationing. This measure is coupled with the attempt to remove anti-dumping duties on American manure imports.

But the European Commission is also engaged in an internal “saving process”. In fact, a revamp of the plan for debt and deficit is about to be launched: the deal would agree to country-specific measures to monitor and keep under control debt burdens over the years.

However, some aspects have yet to be defined, such as the criteria according to which deficits would be classified as excessive or, in some way, inadequate and deviating from the budget rules.