The damage done to European economies by sanctions against Russia can be curtailed neither soon nor easily, even if the war stops.<\/p>\n\n\n\n
And not just because Europe is dependent on Russian oil and gas imports, but because all trade with a big country is cut off. In Ukraine and Russia there are factories that supply European industries with spare parts, technological products, electrical equipment, many products used by European industry.<\/p>\n\n\n\n
There are also factories in European industries that have ceased operations. This means that European industries will immediately face very large product shortages and will be forced to reduce their production. Deficiencies in the supply chain lead to rapid increases in commodity prices, which, together with energy prices, drive up inflation. European inflation has already jumped to 5.8% in February and is expected to reach 7% this year.<\/p>\n\n\n\n
As long as the war continues and the economic sanctions are maintained, the costs are starting to be very high for both European companies and the European economy as a whole. The burden is certainly on the backs of European consumers, who see their disposable income disappear and their standard of living plummet. Much more important are the effects on the weaker economic strata and especially in the countries with the lowest wages. This is because a low wage is much harder to cover – or, perhaps, can no longer cover – increases in energy costs and prices for basic consumer goods, such as food.<\/p>\n\n\n\n
To tackle inflation, there will be immediate decisions by the European Central Bank, which, however, will have to put its imagination to work because the use of interest rate weapons is dangerous at this stage.<\/p>\n\n\n\n
It would normally raise interest rates to tackle inflation, but this in a period of reduced production and a recessionary climate could cause irreparable damage to business and very big problems in societies. Unfortunately, there is no easy solution for central bankers, who are called upon to balance on a tightrope.<\/p>\n\n\n\n
Respectively, governments have to cover the damage caused by inflation to households and businesses, and this ultimately means state aid in each case. This aid should be specifically identified and authorized by the European Union and then tailored by governments according to the needs of their economies and citizens.<\/p>\n\n\n\n
So far the aid given, e.g. to cover the increase in the price of electricity, are very low in relation to the consumer charge. It is noted that in addition to the real problem, there is an increased degree of speculation, which further burdens all prices and fuels inflation, pushing many households to the brink of poverty.<\/p>\n\n\n\n
The various institutions of the Republic, such as the Competition, Consumer Protection, Banking Control Committees, etc., which are largely relatively inactive, must play a very large role. Unfortunately, they do not have the staff, the know-how, or the mentality needed to do their job properly, but at the moment it is necessary to wake them up.<\/p>\n\n\n\n
In terms of growth rate, it is understood that there will be consequences and it is not ruled out, depending on developments, that Europe as a whole may go into recession again. This will happen if the sanctions last for a long time. The point is that, as things stand, it is now very difficult to restore EU relations. with Russia. There were very serious conversations – as they say in the cafes – and besides that many companies left and closed their facilities there and they can not just reopen.<\/p>\n\n\n\n
The interesting thing about this World Economic War I is that the companies coordinated directly with the general policy of sanctions and took a very high cost implementing them. They have lost suppliers, partners and consumers, and this is causing them a huge financial burden, which takes a lot of time and a lot of money to cover.<\/p>\n\n\n\n
So even if the war ends, sanctions will be difficult to lift and economic relations with Russia will not be restored to the level they were in the foreseeable future, perhaps not for many years. Addressing this multifaceted economic and political problem will require new policies at European Union level, and this, as we all know, takes time in the European bureaucracy.<\/p>\n\n\n\n
Therefore, for a long time we will still face severe financial problems, despite the fact that the markets seemed to discount solutions soon. They react to get the broken ones, but they do not take into account the time required even in the best case scenario for the companies to return to the previous situation.<\/p>\n\n\n\n
They also do not take into account the effects that a possible bankruptcy of Russia would have on the bond markets and the world banking system, nor what kind of bankruptcy carousel could create \u2026 So let us not be carried away by the sudden upward trends serial still has many episodes, with great variations.<\/p>\n","protected":false},"excerpt":{"rendered":"
The damage done to European economies by sanctions against Russia can be curtailed neither soon nor easily, even if the war stops. And not…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[859,5],"tags":[1983,25,1976],"class_list":["post-7911","post","type-post","status-publish","format-standard","hentry","category-economics","category-economic","tag-economy","tag-eu","tag-war"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7911","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7911"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7911\/revisions"}],"predecessor-version":[{"id":7913,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7911\/revisions\/7913"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7911"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7911"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7911"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}