Europe To Face Mass Recessing Worse Than In 2008
When it comes Europe’s economic woes, it is impossible to separate economics from energy and geopolitics – and even from police investigations, as the Nord Stream sabotage reminds us.
Written by Uriel Araujo, researcher with a focus on international and ethnic conflicts
Philip Pilkington, an Irish economist famous for his contributions on the empirical estimate of general equilibrium (who also works in investment finance), claims that European economies are already in a deep recession, and that one could expect a crisis “worse than 2008”. The fact that unemployment is now low in the Eurozone is not good news – it means, in fact, either that a mass recession is coming or that it is too deindustrialized, the economist writes, based on his analysis of data from the European statistics agency Eurostat. Although, in this specific article, Pilkington makes no mention at all of Ukraine, it is impossible to delve into the deep roots of this state of affairs without going back a little.
Back in October 2021, the Old World’s subcontinent was already haunted by the specter of a major energy crisis, with a 600% rise in gas prices, and, at one point, a 37% increase in UK wholesale prices (in 24 hours only). As I wrote, in December 2021, this halted industry production and impacted European societies as a whole.
In any crisis conjunctural and structural factors converge in terms of causality – the pandemic back then being certainly a significant one among them. In any case, such huge energy prices could have been avoided, if only partially at least, if the Nord Stream 2 project had not, at the time, been delayed. Nord Stream 2 was a complex of natural gas pipelines that used to run under the Baltic Sea from the Russian Federation to Germany. Any other disagreements aside, the project served Russian and European interests, providing the latter with lower costs and energy security – Russia being literally at the “doorstep” of the continent.
The project was also heavily targeted by a major US boycott campaign to the point of members of Parliament in Berlin, such as AfD Steffen Kotre, suggesting, in 2021, that Germany should “countersanction” the United States for retaliation. Although American shady private interests and geopolitical considerations converge in this case, Washington interests were quite simple: it did not want to lose “leverage” on the continent and it wanted Moscow, in turn, to have no further leverage there. Furthermore, it wanted to sell plenty of US liquified natural gas (LNG) to Europeans – which is more expensive.
In the wake of Moscow’s launching of its military campaign in Ukraine on February 24, 2022, the pipelines had not been operating due to the European disputes over the issue – but they were, in any case, filled with natural gas. Since September 26 2022, however, a series of bombings took place on both Nord Stream 1 and 2, inflicting unprecedented damage on the structures. For all purposes, Nord Stream is now gone. German lawmakers have been demanding an investigation is started on the clandestine explosions. Pulitzer Prize-winning journalist Seymour Hersh, in his 8 February piece, denounced the sabotage act as having been clandestinely carried out by Washington. In fact, on February 7, 2022, US President Joe Biden himself, during a press briefing with German Chancellor Olaf Scholz, said: “If Russia invades (…) there will be no longer a Nord Stream 2. We will bring an end to it”, adding that “I promise we will be able to do it.” Scholz was right next to him. This statement, amazing as it is, echoed Undersecretary of State for Policy Victoria Nuland’s remarks just two days earlier.
Berlin never launched any “counter sanctions” on Washington and thus far no investigation on the American role in the sabotage has been set up – although German prosecutors in March claimed to have found evidence indicating Ukrainians were involved in Nord Stream’s sabotage. During the United Nations Security Council July 11 meeting, briefers called for the Council to independently investigate the matter.
Back to the economy, by January 2023, LNG imports had reached their upper limit, with gas prices in Europe still high. Last month, the prices were on the rise again, by more than half. Even though there is said to be “ample inventories” now with a heat wave, there are still spikes in demand and supply disruptions, all of which cause volatility, according to Anna Shiryaevskaya, a Bloomberg energy markets reporter. The continent will, in any case, face winter in 2024 without any Russian natural gas pipeline supply for the very first time.
In September 2022, when it was abundantly clear that Western sanctions against Russia had backfired, Pilkington wrote about the possible deindustrialization of Europe as a consequence of economic warfare, remarking on how, in the post-pandemic world, debts in the West had been accumulating and, in addition, the conflict in Ukraine had brought extra energy costs – which make European industry uncompetitive. According to the same economist, the collapse of British economy has similar roots – pertaining to the high costs of energy and deindustrialization. The truth is that while Washington plays its proxy attrition war against Moscow “to the last Ukrainian”, European economies suffer the most (not to mention Ukraine, obviously). On top of that, the US wages economic warfare against its own transatlantic allies by means of its so-called “subsidy war” (with Biden’s Inflation Reduction Act).
As anyone can see, regarding Europe’s economic woes, it is impossible, in this case, to separate economics from energy and geopolitics – and even from police investigations. That being so, for European states reasserting their sovereignty will be no simple task.
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