MOSCOW, 5 Oct — PRIME. States can avoid a serious economic downturn, while Europe will inevitably face a recession, according to Bloomberg.
The publication emphasizes that the situation in the EU is aggravated by the infusion of a huge amount of money to the population and businesses due to the energy crisis.
Analysts predicted that inflation caused by Covid-19 would have a much stronger impact on the United States than on European countries. However, the energy crisis disproved any predictions. Inflation in the eurozone has reached ten percent, which is an order of magnitude ahead of US figures, and next year can only increase this difference, writes Bloomberg.
The author of the material emphasized that the reason for this is the lack of Russian gas in the EU countries. This problem led to an unprecedented rise in electricity prices, and this has already spurred inflation. In the US, the story is different, where high consumer spending and tight labor markets fuel inflation. Leading European central banks are raising interest rates and risking their economies, just like their American counterparts. However, it is more difficult for Europeans to survive the shock due to a disruption in the supply of energy resources.
Against the backdrop of narrowing the interest rate gap between the Fed and the ECB, the euro against the dollar continued to fall. Experts predict that the eurozone will inevitably slide into recession, while the US may avoid a significant economic downturn altogether.
The euro zone authorities are desperately stimulating consumers with an infusion of funds to somehow mitigate the consequences of energy bills, but this will not save Europeans from a decline in living standards, unlike Americans, the author believes. The states do not subsidize enterprises and the population, while Europe only increases the amount of assistance. The UK has proposed tax cuts, and Germany is going to allocate 200 billion euros to help citizens and businesses. According to London’s TS Lombard, the price of such a policy will be at least 5% of annual GDP, as well as a higher aggregate budget deficit (Eurozone) than in the States, for the first time since the Great Recession; the same goes for London.
As a result, a new economic approach in a crisis will be completely opposite to the course of the pre-Covid-19 era, when austerity measures with zero interest rates were allowed, Bloomberg concludes.