Uncertainty is increasing about the European economy’s ability to recover from the recession caused by the Covid-19 outbreak. In its most recent prediction, the European Commission portrayed a positive picture of growth, with the economy predicted to rise by 5% and 4.3 percent in 2021 and 2022, respectively. However, an increasing number of analysts believe that the potential for development will be hampered by additional restrictions in the run-up to Christmas this year, due to a fourth/fifth wave of the pandemic presently ravaging Europe, exacerbated by the discovery of a new coronavirus type. Higher inflation, owing in part to high energy prices and interrupted supply chains, is also considered as a threat to the euro area’s and EU’s economies, as are high levels of public debt in many countries. This note collects links to recent publications and commentaries on the state of the European economy, as well as debates over how to reform it, from a variety of international think tanks.
Why is Europe experiencing a downturn?
Will the current confrontation result in a recession, which is a critical worry for investors? The chances are above average, but still less than 50%, in our opinion.
Outside of Russia, Europe has the greatest risk of recession. Due to increased reliance on Russian energy, economic relations, and geographic proximity, Europe’s economy is currently being challenged by higher energy prices and stricter credit conditions in the aftermath of the Ukraine incursion. Because Europe is such a large consumer of products and services supplied by companies based in the United States and Asia, investors all around the world are concerned about the possibility of a European recession.
If all major consuming countries, not just the United States, imposed a blanket ban on Russian energy imports, global energy supply would be significantly reduced and disrupted, making recession more likely. However, that scenario does not appear possible in the immediate future; Germany’s chancellor has flatly rejected the concept of a ban on Russian energy shipments to Europe, citing the economic harm it would do. Furthermore, there is no evidence that Russia intends to cut off energy exports, which account for more than a third of the country’s GDP (GDP).
Economic data from Europe demonstrates that the economy improved in February before the conflict, reversing the omicron-induced slump. Furthermore, due to the war, the European Central Bank (ECB) lowered its prediction for Europe’s GDP growth this year from a blistering 4.2 percent to a solid 3.7 percent. Their forecast included two negative scenarios: a “adverse scenario” in which GDP growth is estimated to be 2.5 percent, and a “severe scenario” in which GDP growth is estimated to be 2.3 percent. Both of these scenarios are far from the negative rate of change that defines a recession. Even in the worst-case scenario, the ECB expects Europe to grow faster than the rest of the world this year, which is unusual for a central bank whose policy has been predicting economic stagnation over the previous decade.
It’s official now. The German economy fell in the fourth quarter of 2021, raising the likelihood of a full-fledged recession by the year’s end. German GDP fell by 0.7 percent quarter-on-quarter, down from 1.7 percent in the third quarter, according to the first official estimate. The economy rose by 1.4 percent year over year. GDP growth for the first half of 2021 was revised upwards, resulting in GDP growth of 2.8 percent for the entire year, rather than the previously predicted 2.7 percent. The German economy slowed in the last three months of the year, according to the statistical agency and available monthly data, owing primarily to sluggish private consumption.
Which European country has the most powerful economy?
In 2020, Germany’s economy was by far the greatest in Europe, with a Gross Domestic Product of nearly 3.3 trillion Euros. The United Kingdom and France, which have similar economies, were the second and third largest economies in Europe this year, followed by Italy and Spain.
What impact did 2008 have on Europe?
The debt crisis began in 2008 with the collapse of Iceland’s banking system, then extended to Portugal, Italy, Ireland, Greece, and Spain in 2009, prompting the coining of an insulting term (PIIGS). 1 It has resulted in a loss of faith in European companies and economies.
What economic problems does Greece face?
Instead of boosting the economy, the country experienced high inflation, large budget and trade deficits, low growth rates, and currency crises. Joining the European Monetary Union (EMU) appeared to give a ray of optimism in this bleak economic climate.
Is the British economy in a slump?
The initial wave of Covid-19 and late entry into a tight lockdown prompted an abrupt freeze in activity across the country, resulting in the worst recession in 100 years. The UK’s GDP fell by nearly 20% in the second quarter of 2020, and by 9.4% for the year as a whole the poorest result among the G7 countries.
Because of the rebound from a larger decline, the economy has expanded at the quickest rate in the group of wealthy nations since then, and in December, it returned to pre-Covid levels. Other G7 countries, such as the United States and France, are, nevertheless, far above their pre-pandemic levels.
What triggered the economic crisis in Italy?
- The euro zone’s third-largest country has descended into a serious political and economic crisis, posing a threat to the European Union (EU) and global markets.
- For many years, Italy has been a difficult country to deal with. In a word, Italy’s troubles are due to a weak economy and a failure to establish a viable political coalition.
- Italy has had a double-digit unemployment rate since 2012 and is one of the countries with the largest national debt (approximately 2.8 trillion euros and climbing).
What is the state of the German economy?
Germany’s economy is a well-developed social market economy. It possesses Europe’s largest economy, as well as the world’s fourth-largest nominal GDP and fifth-largest GDP (PPP). According to the International Monetary Fund, the country accounted for 28% of the euro area economy in 2017. (IMF). Germany is a member of the European Union and the Eurozone since their inception.
Germany has the greatest trade surplus in the world in 2016, totaling $310 billion. As a result of this economic success, it has become the world’s largest capital exporter. Germany is one of the world’s major exporters, with goods and services valued $1810.93 billion in 2019. The service sector accounts for over 70% of total GDP, industry for 29.1%, and agriculture for 0.9 percent. Exports accounted for 41% of total production. Vehicles, machinery, chemical goods, electronic items, electrical equipment, pharmaceuticals, transport equipment, basic metals, food products, and rubber and plastics are among Germany’s top ten exports. Germany’s economy is Europe’s largest manufacturing economy, and it is less likely to be damaged by a financial crisis. Germany performs applied research with real-world applications and sees itself as a link between cutting-edge academic research and industry-specific product and process enhancements. In its own laboratories, it generates a vast deal of knowledge.
What is the state of the EU economy in 2021?
According to preliminary figures released Monday by the EU statistics agency, the eurozone economy grew by 0.3 percent between October and December 2021, despite the rapid spread of Omicron, which slowed activity.
Although growth dropped from 2.3 percent in the previous quarter, full-year eurozone output is expected to grow at 5.2 percent in 2020.
That’s a significant improvement over 2020, when the eurozone economy shrank by 6.4 percent, the deepest recession since the single currency’s foundation and the founding of the European Union.