Foreign exchange news -- experts say the European economy cannot return to normal due to the war in Ukraine

Economists said that the Ukrainian war and the subsequent economic sanctions against Russia will bring greater changes to the European economy and market than previous crises such as the epidemic.

As Russia invaded Ukraine for no reason, European leaders were forced to quickly speed up their plans to reduce their excessive dependence on Russian energy.

On Thursday, the European Parliament called for an immediate and comprehensive ban on Russian oil, coal, nuclear fuel and natural gas.

However, this radical decoupling has a price for the European economy, pushing already high inflation to record levels and could undermine the manufacturing recovery that began last year when countries tried to recover from the epidemic.

Carsten Brzeski, head of global macro research at ing, pointed out last week that Europe was particularly at risk of losing its international competitiveness due to war. The eurozone is currently experiencing a downward trend in its basic economic model, that is, an export-oriented economy with a large industrial pillar and a higher degree of dependence on energy imports.

 

 

The eurozone, which has benefited from globalization and division of labor in recent decades, must now accelerate its green transformation, pursue energy autonomy, and increase spending on defense, digitalization and education. Brzeski believes that this is a challenge that "can and must succeed".

Brzeski said: "If this happens, Europe should be in a favorable position. But until then, the pressure on household finance and income will remain huge. At the same time, corporate profits will remain high. Europe is facing a humanitarian crisis and major economic transformation. This war occurred in Ukraine, the granary of Europe, which is a key production area of food and corn. Food prices will rise to unprecedented levels. Qualcomm in developed economies Inflation may be a matter of life and death for developing economies. "

Economists acknowledge that this structural shift in the European and even global economy will bring additional pressure to central banks and governments, who are in a dilemma between inflation and fiscal sustainability.

BNP Paribas predicted in a report last Thursday that accelerating the process of decarbonization, increasing government spending and debt, intensifying the resistance to globalization and higher inflationary pressure will be a lasting theme.

Spyros Andreopoulos, senior European analyst at BNP Paribas, said that this background makes central banks face greater challenges in implementing policies and maintaining inflation targets, which not only weakens their ability to adhere to a certain policy path, but also is more likely to make policy mistakes.

He also pointed out that raising interest rates in order to curb inflation would eventually make life difficult for the financial authorities.