Opinion: Europe is in trouble as economic skies darken | Stephen Bartholomeusz
The eurozone is in trouble and conditions are worsening as the fallout from the Russian invasion of Ukraine and Europe’s own economic challenges coincide.
, already operating at only 20 per cent of capacity, for three days of what it described as “routine” maintenance. Russia is using Europe’s reliance on its gas – before the war it supplied about 40 per cent of Europe’s gas – to retaliate for the Europeans support for Ukraine and their key role in imposing sanctions on Russia. It has throttled back the supply of gas via the Nord Stream pipeline to only 20 per cent of its capacity, citing issues with the turbines, with Gazprom warning that prices could surge another 60 per cent in winter.
In the zone’s powerhouse economy, Germany, Bloomberg has estimated power prices have topped the equivalent of $US1000 per barrel of oil.A “flash” index for Germany’s manufacturing and service sectors this month has marked the second month in a row where both contracted. Recession is looming for the key eurozone economy.
The lower exchange rate, if sustained, means the eurozone will effectively be importing inflation as the costs of imports – most notably energy imports that are priced in US dollars – are inflated. There has been a convenient relationship between Germany’s economy and the weaker economies of southern Europe.
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