Who will save Europe’s economy?
Europe appears to be headed for a recession if it’s not there already, and matters are worse if you ask: Who will save it this time? Maybe Europe will have to fix itself. Previous dismal estimates for gross domestic product in the second quarter of the year were revised down to abysmal Thursday. The European Union had zero growth quarter-on-quarter, and 0.4% year-on-year.
Most worrying is Germany, which has contracted or stood still since the last three months of 2022 and seems all but certain to tip into recession. Industrial output has fallen all summer, in a worrying way. Some energy-intensive industries such as chemicals and pharmaceuticals appear to be recovering from the energy-price shock that started last year.
But the summer’s industrial slowdown was driven by falling orders of investment goods such as machine tools, notes Holger Schmieding of Berenberg. This suggests a broader decline in confidence at home and in many of Germany’s export markets. In previous European downturns, foreigners were ready to help.
This has taken the form of a booming U.S. economy or a roaring Chinese market—or both—that gave Europe an export-and-investment boost. Maybe not this time.
Chinese growth is in a slump of its own. It is undergoing a repricing of inflated assets such as property that means a recovery may be slow. Even if Beijing does respond with credit-easing stimulus for which many foreigners long, Europe is unlikely to be as big a beneficiary.
When Chinese households and companies buy consumer goods or business equipment, these days President Xi Jinping prefers that they buy Chinese. The U.S. might offer Europe more relief, but maybe not as much as usual.
Read more on livemint.com
