Europe’s Economic Troubles Threaten the Stability of the Entire Globe

By Desmond Lachman

 
Troubles have come to the eurozone economy not as single spies but in battalions.

First, it was the COVID pandemic, which hit major eurozone economies like those of Italy and Spain particularly hard. Then it was a surge in eurozone inflation to record levels, which will soon force the European Central Bank to slam on the monetary-policy brakes and thereby heighten the risk of a European economic recession. Now it is Russia’s Ukrainian invasion, which has sent energy prices through the roof, severely sapping countries like Germany and Italy that are overly dependent on Russian natural-gas imports.

All this could have serious consequences for the global economy.

Not simply because a slowdown in the eurozone economy could mean less favorable export markets for the rest of the world. The need to slam on the brakes and raise rates at a time when some eurozone countries have very weak public finances could precipitate another round of sovereign-debt crisis. That in turn could raise questions anew about whether the euro can survive in its present form.

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Πηγή: aei.org