Across Europe, no one accepts blame for the recession

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Dispatch

08:15

Every EU leader denies the bloc’s self-inflicted economic problems

by William Nattrass

IMF Managing Director Kristalina Georgieva. Credit: Getty.

International Monetary Fund Managing Director Kristalina Georgieva has issued a sobering warning to welcome the new year. A third of the global economy will be in recession by 2023, she said, with the European Union particularly hard hit. The IMF expects half of the bloc to be in recession this year.

Yet even as Europe faces harsh economic realities, there is no agreement on their underlying cause. Countries have been battered by various self-inflicted and self-exacerbating economic shocks, from Covid shutdowns to the current energy crisis, while economic orthodoxies have left them unable to take effective action to counter the risk of recession. But governments continue to interpret monetary issues through the narrow prism of partisan politics.

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The scapegoats of the recession vary. In the Czech Republic, which is already in a mild recession according to the nation’s finance minister, the blame is generally placed on the debauchery of the previous government. Current leaders insist that only their approach resisting populist pressure for more interventionism has saved the country from a worse fate.

Meanwhile, in Hungary, where inflation soared to 22.5% in November, tough times are being described as the inevitable result of sanctions on Russia. Viktor Orbn claims that 2023 will see the EU try to avoid a recession as a direct result of war and Europe’s participation in war, which they call sanctions.

Both Prague and Budapest minimize the role of the policies they have implemented or supported. The Czech government, strongly pro-Ukrainian, makes little mention of the economic damage caused by the sanctions, however morally justified they are. In Budapest, there is no apparent reconsideration of a long-standing predilection for market intervention, from price controls on energy and prized fuels to the most recent caps on food prices introduced in using emergency powers.

The powers that be are looking for easy answers. In Slovakia, coalition chaos and rogue ministers are blamed for tough times; in Germany, Putin’s aggression against Ukraine is presented as the fundamental problem, rather than Berlin’s prior intimate relationship with the Kremlin that left the EU’s largest economy catastrophically vulnerable. A lucid analysis of the interaction of economic problems is not possible, because the authorities refuse to recognize and discuss the factors for which they share responsibility.

This is seen most clearly in the refusal of governments around the world to admit the role of Covid lockdowns in the current economic downturn. Many of today’s problems wreaked havoc on the energy market, inflation, loss of productivity appeared before Russian tanks arrived in Ukraine in February 2022. But like almost every party in power and opposition have backed the lockdowns, all are equally happy to brush their long-term effects under the rug, preferring to point to less personal explanations that have since arisen.

But the combined woes of recession and inflation mean lawmakers’ attempts to evade blame will not pass. A rising cost of living, combined with potential job losses in energy-intensive industrial sectors, will leave workers across the economy wondering how we got here from the relative stability of a while ago. three years. After all, the difference in European GDP growth currently envisaged by the IMF compared to pre-pandemic projections is half a trillion euros.

The answer is that we have brought upon us many of the overlapping crises cited by Georgieva. If those in power today cannot accept their share of the blame, voters will blame them.

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