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The Daily Stirrer

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European Union Is Again Close To A Meltdown As Eurozone Economy Collapses

Once more we return to the political instability and economic fragility of the European Union as the conflict in Ukraine combined with loonytoons Climate Change mitigation policies, the failure of 'sustainables' to meet ever increasing demand for electricity, fod shortages and rampant price inflation put economic and social pressure on governments of member states

The European Union was in big trouble long before Britain voted to leave in 2016 (and finally left in 2021), the financial strain of a basketload of economic basket case nations relying on Germany's industrial powerhouse economy to support them was starting to fray the threads of unity that held the then 28 member - state together which the loonytoons green energy poicies and politically correct approach to immigration and other social issues imposed by the technocrats in Brussels were dividing nations internally as well as against each other. But somehow the Brussels elite and their loyal supporters in member state governments managed by a mixture of bullying and manipulation to hold thins together.

But they cannot continue business as usual for much longer it seems. The Russia -Ukraine conflict is taking a toll on the Euro-zone and it could result in finally pushing the Union into the abyss. Every problem emanating from Russia's invasion of Ukraine is amplified for the region which was already struggling economically and politically. Soaring energy prices and out-of-control cost of living increases combined with stagnate growth and a growing trade imbalance with China and India you have the recipe for disaster. And then there is the inevitable runaway inflation that is the inevitable result of the insane money - printing exercise formally known as the COVID pandemic response.

A report publishd by Reuters this month shows the Euro-zone year - on - year inflation rate surged to yet another record high in May to to 8.1% in May from 7.4% in April. Energy costs due to the sanctions imposed on Russia in retaliation for the incursion into Ukraine are no longer the only factor pushing up the figure. Excluding food and energy prices, inflation rose to 4.4% year-on-year from 3.9%. This pressures the European Central Bank to bump up interest rates further. Unfortunately with Germany and several other EU nations being forced to ration domestic fuel, while transport costs have led to problems with food distribution and empty shop shelves, such a move ought to be unthinkable. Europe's economic war with Russia has highlighted just how weak Europe is.

Should Ukraine conflict drag on, as it may with EU and NATO member states supplying the suicidal nutcases in Kiev with high tech military hardware thus enabling them to prolong the war, Russia could completely cut off gas to Europe. Currently it appears Russia intends to keep Europe from restocking its storage facilities, which will cause widespread hardship substantially increase Russia’s leverage in the winter months. In the past three months Russia has cut off gas supply to several European countries that refused to pay for gas in rubles and has also substantially reduced the flow through the Nord Stream. This has cut off supplies to France and reduced flows to Germany by some 60 percent.

With inflation at 4 times the ECB's 2% target, policymakers face the toxic mix of raising rates and a shrinking economy. Trapped between galloping inflation, and political instability due to economic chaos and hoping to tame inflation, ECB President Christine Lagarde is moving to raise rates. Some policymakers and economists doubt small moves will be enough, especially since underlying inflation is showing no signs of abating.

Due to supply chain problems in the wake of the pandemic, then as a result of Russia's war in Ukraine, prices have been soaring across Europe. This suggests the years of of ultra-low inflation are at an end. What many economists tried to blow off as a transitory blip prices has now become embedded in the economy. The fear is that once high energy prices filter through into the general economy, inflation will get entrenched and eventually perpetuate a price-wage spiral.

Data from the European Union's statistics agency, Eurostat shows the euro zone's trading account swung to a record deficit in January from a surplus a year earlier as the cost of imported energy increased. The euro-zone's trade deficit in goods, the difference between exports and imports, was 27.2 billion euros ($30.17 billion) in January, compared with a EUR10.7 billion surplus the same month a year earlier.

Euro-zone governments are already facing all these problems, the last thing they need is another refugee crisis on a par with the influx of illegal migrants in 2015. This time the invasion is caused by food insecurity across Africa the Middle East and South East Asia and the threat of an energy-scarce winter as 2022 comes to a close. The EU abandoned all structural reforms in 2014 when the ECB started its quantitative easing program (QE) and expanded the balance sheet to record levels. Considering the above, it is difficult to remain optimistic that The European Union is on the right track. Member nations are aware of this and are becoming more inclined to ignore Brussels imposed policies and go their own way.