The European economy is on the verge of recession


After seasonal adjustment, the GDP of the euro area and the EU in the third quarter of this year grew by only 0.2% month on month. The economies of Belgium, Latvia and Austria have shrunk gradually as well. Furthermore, due to the current severe inflation and energy shortage in Europe, and the sharp increase of interest rates by the European Central Bank, the European economy has further declined.

Serious inflation

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Affected by the conflict between Russia and Ukraine, European food prices and energy kept rising and inflation remained high. Inflation rates of 11/ 19 member countries of the euro area are above 10%. The most difficult situation is that the inflation rate in Estonia, Latvia and Lithuania, which are located in the Baltic Sea, is as high as 20%. At the same time, under the influence of the Federal Reserve's policy of raising interest rates, the exchange rate of the euro against the dollar continued to fall, further exacerbating inflation in Europe. For Europe now, price pressure has spread to more industries, seriously affecting people's lives. About 30% of Europeans believe that inflation is the most stuffing problem at present.

Energy shortage

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For the reason that the escalation of the crisis in Ukraine, Russia stopped supplying natural gas to Europe,Europe has to depend on ships to transport natural gas from the United States and other places to maintain power supply and household heating, This directly led to the rapid rise of natural gas and electricity prices, forcing a large number of enterprises to reduce production or even stop production. At the same time, the high heating and electricity costs and the rising living expenses have seriously weakened the people's consumption capacity. ING pointed out that the real wage growth in Europe is at the lowest point in decades, consumer confidence is close to the historical low point, and sales in recent quarters have been declining. Due to the impact of the energy crisis, Europe's energy intensive industries such as steel, glass, paper making and fertilizer have been seriously impacted. According to industry statistics, the idle rate of European steel production capacity in the past few months was close to 10%, the production of aluminum was reduced by about 50%, and the fertilizer industry was particularly serious, with almost 70% reduction.

Tight monetary policy

Since 2022, in order to deal with serious inflation, the European Central Bank has raised interest rates by 200 basis points. Therefore, some experts believe that the tightening monetary policy of the European Central Bank will not only be difficult to curb inflation, but also increase the pressure of economic recession.At the same time, the sharp interest rate increase of the European Central Bank also interfered with the European stock market, which has been supported by loose monetary policy. The increase in borrowing costs also increased the risk of a new round of debt crisis.Judging from the current situation, the European economic outlook is bleak.