Daily Management Review

FT: EU economy may suffer in the coming months


Rising energy prices and heavy expenditures by EU members, according to Financial Times (FT) analysts, might push the European economy into recession.

The European Central Bank (ECB) should boost its prime rate to combat inflation in the near future to avoid such effects.

"Economic growth has slowed significantly after a remarkable comeback from the effects of the coronavirus last summer. The eurozone's GDP rose by only 0.3 percent in the fourth quarter of 2021 and 0.2 percent in the first quarter of 2022, which happened to coincide with the Russian invasion into Ukraine," the newspaper noted.

According to the newspaper's analysts, EU countries who are net energy importers should reduce their budget expenditures and restore the balance between demand and supply of resources.

The 1973 oil crisis is mentioned in the report as a comparison to contemporary economic conditions in Europe. "Back then, countries that had promptly repressed inflationary processes and suffered a short, shallow recession," the FT authors wrote. Those who chose the easier path, such as Italy and France, experienced sustained high inflation and had to go through a severe recession in the early 1980s to combat it.

source: ft.com