Europe between the jaws of deficit and deflation
The conditions for the European Union countries have become more complicated, so while hopes were pinned on not facing a second wave of the Covid-19 epidemic, or for it to be at least a slight wave, like the one that China faced, the situation has become complicated since the resurgence and force. According to the expectations of the European Commission, a rapid exit from the crisis has become elusive, especially with the closures that the region will witness in the coming period.
The closure is the master of the situation, and with it the potential for despair for many people and institutions facing a sharp decline in cash flows that prevent them from meeting the cost of working capital, which threatens many of the interconnected activities and supply chains between the European Union, which is the foundation on which the Union has worked for decades, and supported it with much Agreements and laws, but today it faces a very difficult challenge, and the European Union and the Euro may seem a great obstacle to the flexibility that countries should have had in such circumstances.
Deflation travels between countries as the epidemic moves, and the European Commission asserts that the recession will affect the economies of all 19 eurozone countries, although its effects will be more severe on Spain - 12.4 per cent, Italy - 9.9 per cent, and France - 9.4 per cent. Cent ". The economic relations between the countries of the Union and the supply chains between the countries were what enabled them to overcome the problems of secession from the Soviet Union in the early nineties of the last century, and the Union worked strongly to strengthen industry and benefit from the density of skilled labor, and succeeded in settling industries in emerging countries at that time, and Germany remained. The first economic power in the region, but today, and unlike in those days, it is also suffering a contraction, which is expected to reach 5.6 percent, by the end of 2020.
According to a recent report published by Al-Eqtisadiah, retail sales declined in the euro area due to a decrease in purchases in all categories in the 19 countries that use the euro, by more than 2 percent, on a monthly basis in September, and this decline is concentrated in the decline in clothing sales And textiles 7.6%, while sales of electronic goods, furniture and goods, which are ordered by mail or via the Internet, witnessed an increase, which was able to mitigate the decline in the overall numbers. The great dependence among the countries of the Union, which gave them global supremacy in past periods, is what shackles them today, and departing from this rule requires a departure from the union, and Britain's experience is still ravaging trade, jobs and employment, and it seems that no one is ready to repeat the experience, whose headache has not ended. Painful yet.
But the problem in Europe goes beyond supply chains and labor movement, so what the second wave of the epidemic brought with the decisions to return to the shocking closure of societies there, governments are forced to extend many facilities and support, while this support and spending corresponds to a clear decrease in government revenues based on taxes, and this This is reflected in the deficit in its public budgets, with an expected expansion to exceed 10 percent, in France, Italy, Spain and Belgium this year.
Although questions still remain about the mechanisms by which the Union deals with the accumulated deficit in the member states, which exceeds the permissible limits in the eurozone, these questions seem not important now as much as the importance of solving the outstanding problems, supporting projects and companies and preserving jobs in order to remain Hopes for recovery remain for 2021, albeit late. According to the vice president of the Commission, the second wave of the epidemic will destroy our hopes for a rapid recovery, and that the economy "will return to the pre-epidemic level barely in 2022," as much as the word (barely) of ambiguity carries it.
Deflation and deficit fully confirm that the GDP of the countries of the Union will be in its worst state of decline, and the reports came to indicate that the GDP of the euro area will decline 7.8 percent in 2020. There are no alternative plans for governments to confront this deficit in public finances except for more borrowing This will increase the size of the public debt, but the calamities do not come individually, for the increase in public debt is accompanied by a decline in the GDP, and the ratio of public debt to GDP is frightening.
As the European Commission announced, the public debt in the euro area will exceed 100 percent of GDP in 2020, and the debt of the eurozone countries is expected to reach 101.7 percent of their GDP this year. The situation will be worse in Greece, reaching 207.1%, in Italy 159.6%, and in France the debt will reach 115.9%. All this difficult and very complex data, keep all eyes fixed on the European Central Bank, which kept its extremely easy policy unchanged, and to provide more support in the next few weeks.