EU economic outlook, which was only made worse by decoupling from Russian cheap energy. This war needs to end with Ukraine stopping being a black hole for western dollars and euros. Stop the war, rebuild and look for economic growth rather than being the sacrificial lamb in the west-east geopolitical tug of war.
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FRANKFURT, Nov 14 (Reuters) - The euro zone appears to be in the middle of another recession but worries about whether definitive growth figures due early next year will have a plus or minus sign in front are missing the bigger picture.
The good news is that the 20-nation currency union is set to avoid a deep contraction that could scar firms, households and banks for years. The bad news is that growth is hovering around zero with little out there to fuel a meaningful recovery.
Economic headwinds are so strong that next year will also be challenging and fading growth potential suggests the euro zone would struggle to expand much more than 1% even with a robust rebound.
Deep structural problems mean Europe is bound to trail most other big economic areas for years to come.
The drop in Europe's working-age population could also come with a quirk. Fearing it will be difficult to hire in future, firms are now hanging onto workers, creating even more labour market tightness, potentially fuelling wage growth and weakening productivity.
"A structural shortage of qualified labour, aggravated by the demographic transition and skill mismatches, is prompting companies to hoard labour despite rising cost pressures and economic uncertainty," UBS economist Reinhard Cluse said.
Germany appears to be the biggest drag. Its energy-intensive heavy industries rely on external demand for growth, leaving it poorly prepared for the new realities of expensive energy and trade tensions.
The potential growth rate for Europe's largest economy is now below 1%.
https://www.reuters.com/markets/europe/europes-problems-are-far-bigger-than-shallow-recession-2023-11-14/This post was edited by ofthevoid on Nov 14 2023 01:31pm