Tom Williams
Many in America, especially the socialists on the Left, pine for what they feel is an economic and cultural wonderland in Europe. But before you book your ticket and load up your U-Haul, let’s look at some recent economic data from the EU.
Inflation in the Eurozone spiked to a new record in June, according to preliminary data released recently by Eurostat. The overall rate of CPI accelerated to 8.6% in June, from 8.1% in May, and from 7.4% in April. All of them were records in the Eurozone data going back to 1997. See this in the chart below and learn more here.
These are massive scary inflation rates in the 19 Eurozone countries. See this in the table below.
| Estonia | 22.0% |
| Lithuania | 20.5% |
| Latvia | 19.0% |
| Slovakia | 12.5% |
| Greece | 12.0% |
| Slovenia | 10.8% |
| Belgium | 10.5% |
| Luxembourg | 10.3% |
| Spain | 10.0% |
| Netherlands | 9.9% |
| Ireland | 9.6% |
| Cyprus | 9.1% |
| Portugal | 9.0% |
| Austria | 8.7% |
| Italy | 8.5% |
| Germany | 8.2% |
| Finland | 8.1% |
| France | 6.5% |
| Malta | 6.1% |
Juxtapose this inflation data with wage growth, and we have a dismal picture forming in Europe. Wages and salaries in the European Union increased 2 percent year-on-year in the fourth quarter of 2021, following a 2.8 percent rise in the previous three-month period. You do the net math between inflation and wage growth. See this in the chart below and learn more here.
Looking at the European Central Bank (ECB) staff projections for GDP growth, it looks like a dead man as the pulse goes to zero – even with all the stimulus being pumped by the ECB. See this in the chart below and learn more here.
But this European data is the current economic picture. What are some potential “Black Swans” to look out for that could make a precarious situation even worse? Consider a couple.
1) Energy Price Shock
How long before Putin shuts off natural gas delivery to Europe? Especially with the seeming unwillingness of the West to negotiate in the Ukrainian conflict. Perhaps the question is not a “what if” but a “when” question. No one can answer other than perhaps Putin. He might not even know because the situation is fluid. Timing depends on when the EU expects to fill its natural gas storage for the winter months.
The EU telegraphs that answer with daily reports of progress in filling storage facilities. Putin could act now, or in August, or later perhaps even taking long-term weather forecasts into consideration. Whereas the EU is mostly transparent, Putin operates in a nightmare of fog. He will shut off the gas (or not) at a time of his choosing to achieve his goals.
The long-term average of natural gas prices in the EU is in the 12-15 range, but it’s now 148. The EU is paying 10 to 12 times its long-term average. See this in the chart below and learn more here.
On June 8, a fire at the Freeport liquid natural gas (LNG) terminal near Galveston, Texas, shut down the terminal. Freeport is the second-largest LNG exporter in the US. It accounts for 15% of LNG exports. LNG that would be exported to the EU now won’t.
If Putin makes good on his threats, prices could go off the charts. If European energy prices do not come down soon, the summer fun could give way to a winter of discontent as energy bills are set to skyrocket. It will not only affect individuals but many of the businesses that may face shutdowns with these sustainable price shocks.
2) Oh no … Covid.
Several countries in Europe are reporting new spikes in Covid. There is already some talk of new mask mandates. See the most recent Covid numbers from France below.
Who knows where this Covid story goes, but if Europe goes back to more mandates, lockdowns, and vaccine programs (QR Codes) as before … you can stick a fork in the EU economy and call it done. There will be social unrest as well.
This European economic picture looks similar to the US, though it is more severe, and the “Black Swan” events could be more devastating if they come to fruition. The unfortunate reality is that the behemoth socialist states of Europe are failing faster than the US under the Biden administration. Europe is standing on the edge of the Abyss.
To the American socialist – are you sure you want to follow Europe?
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