The dilemma of ＂deindustrialization＂ in Europe has intensified.
Since the outbreak of the conflict between Russia and Ukraine, Europe has followed the United States to impose several rounds of severe sanctions on Russia. Recently, a number of foreign media reported that the spillover effects of sanctions against Russia caused high inflation in Europe and the economy continued to be under pressure. Europe is increasingly worried about the problems brought by sanctions.
find it difficult to advance or to retreat―be in a dilemma/plight
According to today’s Russian International News Agency, Uwe Schultz, a German parliamentarian, recently warned that the EU’s largest economy is facing further economic recession and "de-industrialization" due to the EU’s sanctions against Russia. Schultz issued a statement on the website of his political party, saying that economic sanctions against Russia have hit the German economy hard. Schultz said that the sanctions against Russia and the economic measures taken by the German ruling Coalition are leading Germany directly to "de-industrialization", "the economic prospect of Germany in 2023 is disappointing" and "the poor performance of the automobile industry continues to lead to a decline in manufacturing output". Stefan Wolff, president of the German Federation of Employers’ Associations in the Metal and Electrical Engineering Industry, also believes that the German economy is no longer competitive and is expected to fall into recession in the second half of this year.
According to preliminary data released by Eurostat on July 31, Germany’s GDP in the second quarter of this year increased by zero month-on-month, which was less than the market’s previous expectation of 0.1%. According to the latest forecast of the International Monetary Fund, the German economy will shrink by 0.3% in 2023.
Many European companies are also facing the negative impact of European sanctions against Russia. The Financial Times recently conducted a survey on the operating conditions of 600 large European enterprises, and the results showed that 176 of them lost more than 100 billion euros due to the reduction, sale or closure of their business in Russia. This figure does not include the losses caused by indirect factors such as rising energy prices and rising production costs caused by the Russian-Ukrainian conflict.
According to statistics, before the outbreak of the conflict between Russia and Ukraine, more than 1,800 large enterprises in Europe had operations in Russia, and more than half of them still continue to operate in Russia. According to the analysis, many European enterprises are in a dilemma under the influence of European sanctions against Russia: on the one hand, leaving Russia will have a direct negative impact on their own operations, on the other hand, staying in Russia will face more and more political and economic risks.
Since the outbreak of the conflict between Russia and Ukraine in February 2022, European countries have followed the United States to impose several rounds of sanctions on Russia. In May, the British government announced the expansion of sanctions against Russia, including punitive import tariffs on precious metals produced in Russia and export bans on certain British products. In June, the EU reached an agreement on the 11th round of sanctions against Russia, including measures aimed at cracking down on circumvention of existing sanctions. Russia retaliated against Europe by cutting fuel supply and implementing ruble settlement.
"The impact of sanctions against Russia on European countries is not exactly the same, and two types of countries are the most affected: first, countries that are highly dependent on Russian energy, such as Hungary and other Central and Eastern European countries; Second, countries whose industrial structure is dominated by manufacturing and energy-intensive industries, such as Germany, Italy and other European manufacturing powers. " Yan Shaohua, an associate researcher at the China-EU Relations Research Center of the Institute of International Studies of Fudan University, said in an interview with this reporter.
Fatal impact
"In recent years, the European economy has been affected by the European sovereign debt crisis ‘ Sequela ’ The continuous influence of is in a slow recovery. After the outbreak of the Russian-Ukrainian conflict, this recovery process was disrupted. The biggest impact of sanctions against Russia on European countries is to aggravate Europe ‘ De-industrialization ’ Worried. " Zhang Jian, vice president and researcher of China Institute of Contemporary International Relations, told this reporter that German, Italian and other European countries have comparative advantages in the field of high-end manufacturing, and an important basis for this advantage is cheap natural gas from Russia. Nowadays, these European countries are bearing the cost of sanctions against Russia, that is, losing cheap Russian natural gas and having to purchase more expensive energy from other countries, which has led many European manufacturing enterprises, especially energy-intensive enterprises, to face rising production costs and be forced to cut production, stop production or move their production lines outside.
Purchasing Managers’ Index (PMI) released by Standard & Poor’s Worldwide shows that in July, the manufacturing PMI in the euro zone dropped to 42.7, the lowest level since the outbreak of COVID-19. As a big European manufacturing country, Germany performed poorly, and its manufacturing PMI plummeted to 38.8 in July.
The report of the United Nations Department of Economic and Social Affairs pointed out that high energy prices weakened the competitiveness of European energy-intensive industries, resulting in the loss of market share.
The economic census report released by dihk this summer also shows that the fluctuation of energy and raw material prices is the biggest risk faced by German enterprises, among which 80% of energy-intensive enterprises list it as the number one risk. According to the report of "Credit Reform", a German credit agency, the number of German enterprises filing for bankruptcy in the first half of 2023 increased by 16.2% year-on-year. In addition, many enterprises plan or have begun to transfer their business to countries with relatively low energy. For example, dozens of enterprises, including Lufthansa and Siemens, are considering expanding production and increasing capital in the United States.
"Affected by the COVID-19 epidemic, the European economy is already facing problems such as high inflation rate, high unemployment rate and broken supply chain, and sanctions against Russia have further aggravated these problems. From the production point of view, sanctions against Russia have led to the gradual energy development in Russia and Europe ‘ Decoupling ’ It is difficult for European countries to find a suitable alternative in a short time to make up for the loss of cheap energy in Russia, which makes the manufacturing cost rise sharply. From the perspective of consumption, energy shortage leads to soaring energy prices, which will inevitably affect commodity prices in European countries, thus pushing up inflation and increasing people’s living costs. " Yan Shaohua said.
Some analysts pointed out that Russia is an important supplier of raw materials for high-end manufacturing in Europe. There are many links in the industrial chain of high-end manufacturing industry, and the supply chain is accurate and complex. The obstruction of the upstream link means the source fracture of the industrial chain and supply chain, which will have a fatal impact on the whole industry. Although Europe tries to avoid areas that will "jam its neck" in the process of sanctions against Russia, with Russia’s retaliatory countermeasures, Europe’s high-end manufacturing industry is in a passive position.
snow plus frost—exacerbate
Agence France-Presse reported that since the outbreak of the conflict between Russia and Ukraine, the EU has imposed unprecedented sanctions on Russia, but EU diplomats admit that the EU sanctions are close to the limit.
"At present, there is little room for further escalation and overweight of European sanctions against Russia. However, in the short term, sanctions will continue and there is no room for manoeuvre. In this context, Europe’s next question is how to deal with the impact of sanctions on itself. Since the energy crisis last year, Europe has been looking for ways. The European Union has introduced a series of measures, on the one hand, to find energy suppliers that can replace Russia, on the other hand, to release ‘ Green agreement industry plan ’ Accelerate energy transformation and green development. " Yan Shaohua believes that with the relevant EU policies gradually playing a role, the pressure faced by EU countries in energy this year may be eased compared with last year, but the problem has not been fundamentally solved.
Leonhard Birnbaum, CEO of Eon Energy Group, pointed out that the EU will change its energy structure and reduce its imports of Russian energy due to the conflict between Russia and Ukraine, and this trend will continue, so the energy crisis in Europe is far from over. "In the long run, because we can’t get cheap energy from Russian pipelines, it is expected that the price of natural gas will rise, which may be two to three times that of now." Leonhard Birnbaum said.
According to the preliminary statistics released by Eurostat on July 31, after zero growth in the first quarter of this year, the euro zone economy grew by 0.3% in the second quarter. Analysts pointed out that although the euro zone economy has resumed growth, the risk of stagnant growth still exists due to factors such as high inflation, weak global demand and monetary tightening policy. Among the major economies in the euro zone, Germany and Italy continue to suffer from the shrinking demand for goods due to the larger manufacturing scale.
"In the foreseeable future, it will be more difficult for the European economy to turn around. On the one hand, the energy security situation in Europe has not fundamentally improved, European manufactured goods have lost the Russian market, and the competitiveness of European products will continue to decline; On the other hand, the United States introduced the Inflation Reduction Act and the Chip and Science Act to attract European companies to invest in the United States, which will make the European economy worse. " According to Zhang Jian’s analysis, as the largest economy in the European Union, Germany has strong economic radiation, especially its close integration with the economies of neighboring countries. If Germany is affected by sanctions against Russia and its economic situation cannot be effectively improved, then in the next three to five years, Germany’s neighboring countries and even the entire euro zone economy will also encounter troubles, and the overall economic policy and political and social stability of the EU will be negatively affected.
Some analysts pointed out that high-end manufacturing is the core of European real economy and one of the main engines leading European economic growth. If it is difficult for European countries to get through the obstruction of industrial chain and supply chain, it may be difficult to maintain their leading position in high-end manufacturing in the future. By then, Europe will not only face the problem of economic recession, but also be more difficult to achieve "strategic autonomy".