Europe becomes the hardest hit area of ​​global stagflation

　　The global economy is struggling with stagflation, and Europe has become the hardest hit area for stagflation. The backlash of sanctions against Russia and the looting by allies have become the direct cause of stagflation, which is particularly serious in Europe.
　　The world is suffering from stagflation, and Europe is in the worst situation. The global economy will suffer the worst recession since the Great Depression in the 1930s in 2020, and in 2021 it will form the strongest recovery after the recession since World War II. By the fourth quarter of 2021, signs of inflation have begun to emerge, but they have not received enough attention, which has delayed the good opportunity to adjust policies in time for governance. Entering 2022, the demand expansion brought about by the economic recovery will be stronger, but the supply chain blocked by the epidemic is far from being repaired. The Ukrainian crisis that broke out in February has worsened the global supply chain crisis, which has led to a rapid rise in prices and continuous record highs. Faced with soaring prices and the resulting cost of living crisis, major economies had to raise interest rates aggressively. However, aggressive interest rate hikes did not prevent inflation from deteriorating, but led to stagnant growth, thus pushing the global economy into the abyss of “stagflation”. In 2022, the consumer price index (CPI) in developed economies will rise by 7.2%, which is 4.1 percentage points higher than that of the previous year, and that in emerging markets and developing economies will be as high as 9.9%. The economic growth rate dropped to 3.2% globally after consecutive downward adjustments, 2.8 percentage points lower than the previous year; 2.4% in developed economies and 3.7% in emerging markets and developing economies.
　　Europe is faring the worst in a new bout of global stagflation. The global recession in 2020 will be particularly severe in Europe, with negative growth in the Eurozone reaching 6.1%, 3.1 and 1.7 percentage points higher than the global and developed economies, respectively. In the global recovery in 2021, the momentum of the European Union is still good, and the growth rate is even higher than the average level of developed economies. Unfortunately, the good times did not last long, and global stagflation ensued, which had a particularly severe impact on the European economy. In 2022, the CPI in the euro zone will rise by 8.3%, which is significantly higher than the average level of developed economies, while European emerging markets and developing economies will reach as high as 27.8%. What’s more serious is that after successive interest rate hikes, inflation in the United States has begun to ease, while it remains high in Europe. For example, the CPI in the United States has dropped from a high of 9.1% in June to 7.1% in November, while that in the euro zone is still as high as 10.1%. The economic stagnation in the euro zone is even more serious. The International Monetary Fund has lowered its growth rate to 0.5% in 2023, and the World Bank has even lowered it to zero growth.
　　Joint sanctions backlash, allies take advantage of the fireThe stagflation in the Eurozone has a global background. There are special reasons for becoming the hardest hit area of ​​stagflation in the world. First, after the outbreak of the Ukraine crisis, the U.S. joint sanctions against Russia suffered a backlash, especially the highly dependent energy imported from Russia became the first choice for sanctions and countermeasures, and Europe soon fell into a serious energy crisis. Energy shortages have led to high prices, which has become the primary reason why Europe has become the hardest hit area of ​​global stagflation: on the one hand, rising production costs and operating difficulties have led to economic stagnation; Half a year after the first round of sanctions against Russia, energy prices in the euro zone will rise by 40.8% year-on-year in September 2022.
　　What makes Europe angry is that Europe follows the United States in sanctions against Russia, but the United States stabs its allies in the back and robs them. One is that when joint sanctions against Russia lead to energy shortages in Europe, American energy giants took the opportunity to drive up the price of energy exports to Europe, making a lot of money at the cost of stagflation in Europe; When it was in business difficulties, the United States introduced the “Inflation Reduction Act” to discriminate against non-local companies, forcing some European companies to relocate to the United States, so as to “revitalize American industries” at the cost of aggravating the hollowing out of European industries and economic stagnation; the third is the Federal Reserve The “violent” interest rate hike widened the investment income gap in Europe, and the euro exchange rate plummeted as a result. The United States worsened stagflation in Europe by increasing imported inflation pressure and other channels.
　　Already full of disasters, the future will be even more difficult Since World War II, the European economy has continued to weaken for a long time. After stepping into the new century, it is even more troubled and ill-fated. In particular, the financial crisis in 2008 had severely impacted the European economy. In 2009, the negative growth rate of the Eurozone was 4.3%, which was even more serious than that of the United States (-3.5%) at the center of the crisis, and it was far higher than the global negative growth level of 0.7%. However, when the global economy came out of the crisis and started to recover in 2010, Europe soon encountered a sovereign debt crisis, which formed a vicious cycle of “financial-fiscal” crises with the financial crisis. Coupled with population aging, refugee issues, and Brexit, Europe The economy has been in a downturn for a long time.
　　The current severe stagflation is difficult to get out of quickly, and the future prospects of the European economy are even more difficult. First, the trend of the Ukraine crisis is full of variables. Even if the war can end, the sanctions and countermeasures surrounding Russia will be difficult to lift immediately. This means that the primary cause of stagflation in Europe is difficult to change in the short term. Second, the conflict between the US and Europe, represented by the dispute over the Inflation Reduction Act, will continue, and the “America First” policy will still pose heavy obstacles to Europe’s escape from stagflation. Third, Europe’s own policy means to get rid of stagflation are also very limited. For example, the Ukrainian crisis has forced an increase in military spending, squeezing financial means to promote economic recovery. Continuing to raise interest rates is itself a “double-edged sword”. Even if prices can be suppressed, the cost is to damage growth. What’s more, what the European Central Bank is facing is the different economic situations and different policy demands of different members. There are also long-term problems such as population aging and immigration and refugees, which will cast a heavy shadow on the future of the European economy.