As crisis looms, continent must come together to assert itself, reject US diktats
All of Europe, not just the European Union, is suffering the consequences of skyrocketing energy prices, especially those of gas and electricity, and the disruptions in Russian gas supply. And with the eurozone heading toward an economic recession, people and enterprises across the continent are in for bigger shocks.
All EU leaders have acknowledged the extremely difficult situation they now face.
According to Oxford Economics, some of the problems, especially inflation, are due to the lingering COVID-19 pandemic and the resulting diversion of huge amounts of funds to deal with its economic consequences.
However, the biggest economic blow to the EU has come from the Russia-Ukraine conflict, as it has distracted the bloc from implementing proper economic policies to absorb the inflation shock.
Meanwhile, if China takes an approach to better balance economic exigencies and pandemic control, the nation’s GDP is likely to grow by 5-6 percent in 2023.
“The next five to 10 winters will be difficult,” Belgian Prime Minister Alexander De Croo warned recently as fuel prices and electricity bills reached record highs.
What is worse is that the energy crisis has fueled a liquidity crisis leading to bankruptcies. As Finnish Economic Affairs Minister Mika Lintila said, the unfolding liquidity crisis has all “the ingredients for a kind of a Lehman Brothers of the energy industry”.
According to the media network Euractiv, European energy companies have been strained by “margin calls” — or the need for capital to secure energy trade — of at least $1.5 trillion.
In October 2021, OTIMA, a midsized utility based near Berlin, became the first German energy and gas supplier to file for bankruptcy following spikes in electricity prices.
In Austria, Wien Energie, a local energy utility which is also the country’s largest energy company, has asked the government for a 6 billion euros ($5.89 billion) lifeline.
This came after German energy utility Uniper was bailed out in late July for a price tag of 15 billion euros. Germany has been especially affected, due to its dependence on Russian gas.
In particular, the German chemical and metallurgy industries, fertilizer producers and other sectors may have to stop production for some months, pushing the largest European economy toward recession — and reducing its GDP by as much as 7 percent, something which the German economy has not witnessed since the end of World War II.
This could affect the success of the European Union as an economic bloc.
According to some geopolitical analysts, a number of EU countries have started to play individual geopolitical games to get extra benefits at the cost of other EU states.
Poland, for example, has demanded that Germany pay billions of euros as additional compensation for World War II.
Due to soaring inflation, more than 70 percent of the European population is feeling the impact of economic downturn. People could therefore take to the streets demanding the resignation of governments, which could change the political landscape of Europe ahead of the 2024 European Parliament elections.
Among the biggest fears is the potential increase in extremism, terrorism and nationalism due to the worsening economic situation.
The only way out of this crisis, as in a number of other critical cases, is for the EU to further integrate the needs of the European countries and pursue European interests. Fortunately, fewer and fewer European people, governments and institutions see the US policy as being superior to the EU policy.
So the EU, as before, must set its political priorities, dedicate more funds and time to build the European “political union”, as proposed by French President Emmanuel Macron, devise its own human rights rules, and set its own benchmarks for democracy, while stopping the United States from dictating terms, especially when it comes to sanctions.
Instead of succumbing to the US’ diktats, the EU must cooperate more with China, India and other Asian countries.
To prevent the further destruction of the European Project and European values, the EU must stop the US from manipulating the bloc’s foreign policy, and pursue balanced cooperation with other economies. It must remember its historical mission of establishing permanent peace in Europe and prevent any conflicts of ideology.
The author is a former officer of the European Commission.
The views do not necessarily reflect those of China Daily.