The indicators of the European economies are worrying. Various international houses are limiting their positive forecasts for the economies and reducing the estimates for the growth rate of the European countries. Some believe that some European economies are already in recession. German exports are falling, and so is Germany’s trade surplus. The cost of servicing Italian debt is rising dangerously, as are the cost of servicing the loans of all European businesses.<\/p>\n\n\n\n
All this is due to the increase in the interest rates of the euro decided and persistently continued by the European Central Bank under the pretext of fighting inflation. The increase in the cost of loans, however, is transferred to the prices of products and services, ultimately creating additional inflation. Of course, at some point consumers will not be able to continue buying the expensive products and demand will decrease. But the prices will not fall.<\/p>\n\n\n\n
Inflation in the US was real and rightly the Fed raised interest rates. It was demand inflation. In Europe, however, there was no inflation. There was a sudden appreciation of energy prices and all raw materials due to war in Ukraine. The sharp and large appreciation due to shortages and supply chain disruption is not necessarily being addressed by an increase in interest rates. It is not demand-side inflation, nor will curbing demand drive down prices.<\/p>\n\n\n\n
Instead, rising interest rates created inflation, driving businesses to even higher prices for the consumer. And as governments followed the opposite policy of central banks, i.e. they gave money with allowances and wage increases to deal with the accuracy, in the end, combined governments and ECB achieved the perfect recipe for disaster. They created inflation and at the same time caused recession in the economies.<\/p>\n\n\n\n
What awaits us now? First, a crisis in real estate companies in Europe (of course also in the USA), a new generation of bad loans in European banks due to the collapse of large real estate management companies and debt service problems in all European companies. European businesses will soon face the problem of declining sales and rising costs, and many will not survive.<\/p>\n\n\n\n
The intervention of the “guardian” of price and currency stability, namely the European Central Bank, was disastrous, unless that was precisely the aim. The cooling of economies and the transition to recession. But why should this be the goal? What good is a recession caused by rising interest rates?<\/p>\n\n\n\n
Does he join the long-running dispute between “ravens” and “doves”, ie the central bankers of the countries under German influence and the central bankers of the countries of the European South, over the monetary policy to be imposed in Europe? Is it simply to increase the profitability of the banks by increasing the interest rates on loans? Or is it because the ECB has no other tool to intervene in the markets other than raising interest rates and was afraid that it had to do something in order not to appear inactive? Outrageous, but not possible.<\/p>\n\n\n\n
In any case, the course of the European economies does not look positive at the moment, problems are ahead of us.<\/p>\n","protected":false},"excerpt":{"rendered":"
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