With a leading authority on unemployment describing Eurozone polices as “stunningly destructive’, some noted world economists have again expressed concerns that the recovery, if any, is not long term and that recession in Europe may last well into the future.
The French economy is experiencing zero growth, and Germany’s has contracted in the last quarter, while Italy is heading towards a triple dip recession, with Premier Renzi rebutting suggestions that his Government is set to raise taxes and cut pensions to stay within the 3 per cent GDP limits. Germany’s financial daily, Handelsblatt, depicts France as the sick man of Europe as President Hollande calls for the Euro to be weakened. Some leading economists have launched quite an attack on current EU policies, warning that unless changed, they may result in a fresh debt crisis. All is leading to renewed speculation that Mario Draghi will retreat from the ECB’s long-term policies and opt for quantitive easing. Germany is still committed to low inflation, and Chancellor Merkel says it is difficult to manage a monetary system across 18 countries, when the sovereign parliaments refuse to implement the agreed policies of the European institutions. But she points out that crisis countries have cut their current account deficits and that lasting recovery is now obtainable.
The geo-political problems have yet to show their full effects. The effects of the “Ukrainian sanctions” have not yet worked their way through the economic systems, and analysis of their cost is awaited. The Russian counter sanctions have caused Dutch lenders to flag that their agri. sector will face liquidity problems. The Czech Republic, Bulgaria, Hungary and Slovakia are all dependent on Russia for atomic fuel, for their nuclear reactors, on which they are reliant for electricity. The Greek Energy Minister is seeking EU support in the event of disruption in Russian gas supplies. Even before the sanctions, Germany’s trade with Russia was down 19 per cent in June. The Ukrainian Prime Minister, Yatsenyur complains that the rebels have purposely targeted vital infrastructure, so as to leave lasting damage and the economy now faces serious difficulties, even if the conflict is stopped immediately. So even if the Ukrainian crisis is resolved in the short term, there would appear to be serious fresh damage done to the EU’s direct economy, and to some of its trading partners. Also, account must also be taken of the economic impacts which may result from the conflicts in Gaza, Syria etc. The Eurozone has major problems to surmount.