The European Union is feeling a collective financial downturn. A recent report has suggested the continent is becoming poorer, across the board. The war in Ukraine is part of the reason, with global food supply chains taking a hit after Russia bowed out of the Black Sea grain agreement.
The Wall Street Journal reported that Europe “is rapidly losing its shine” as the continent continues to see its economic power slowly slipping.
Europe has experienced a dramatic decline in consumption spending as the continent entered into a recession at the beginning of the year. The recession appears to be indicative of a slow economic, military, and political decline that started at the beginning of the century.
The report noted that one fundamental issue is that Europeans are spending less money. The WSJ stated that “[t]he French are eating less foie gras and drinking less red wine,” “Spaniards are stinting on olive oil,” and “Finns are being urged to use saunas on windy days when energy is less expensive.”
In Germany, the overall consumption of meat and milk has dropped to the lowest level in 30 years. And Italy’s economic development minister, Adolfo Urso, held a crisis meeting earlier this year to discuss the price of pasta after it jumped “more than double the national inflation rate.”
While Covid-19 and the war in Ukraine has made the situation more severe, Europe has taken on an aging population that values “free time” and “job security over earnings” which has contributed to the economic downswing. Global food supply chains have been disrupted, which means that flood and energy prices have increased, making a bad situation worse.
The report suggested that part of the responsibility could be placed on the government, which, “to preserve jobs, they steered their subsidiaries primarily to employers, leaving consumers without a cash cushion when the price shock came.”
The continent’s strong export industry previously would have been able to stabilize the economic situation, but there has apparently been a slow recovery in China, an important market all across Europe.
Europe’s recent recession was especially felt in the first three months of the year, with the gross domestic product (GDP) falling by 0.1 percent in just the first quarter, according to a report from Reuters in June.
Oxford Economics’ analysts said that “[d]omestic demand is not in a good place,” noting that the first-quarter public spending had reached the lowest on record, except for Covid lockdowns in 2020.
“Going forward, growth will remain soft despite dropping wholesale energy prices, as monetary policy tightening dents investment and still-present inflationary pressures constrain consumption,” they added.
However, some economists have suggested that the recent recession is generally mild, with the European economy being able to avoid a serious downturn. Economists have considered how a suffering European economy might hurt Americans.
Ozge Akinci and Paolo Pesenti, two Federal Reserve Bank of New York economists, said that “when Europe catches a cold the rest of the world sneezes,” seeming to suggest that the US economy would not be greatly affected by the recent development in Europe.