The American Pusher Behind Europe's Poverty Alleviation | European Union | United States

BEIJING, July 31 (Xinhua) -- The American Pusher Behind Europe's Poverty Alleviation

Xinhua News Agency reporter Deng Qian

In the eyes of the outside world, Europeans live relatively affluent and leisurely lives. The wealth accumulation and high welfare social conditions of old capitalist countries allow Europeans to have more leisure to enjoy life. Now, everything seems to be changing. Foreign media said, "Europeans are getting poorer and poorer."

The Wall Street Journal recently published an article stating that the French have reduced their consumption of red wine; The Spanish began to be meticulous about cooking oil; The consumption of meat and milk in Germany has dropped to its lowest level in 30 years; In Italy, pasta prices have risen significantly... In terms of per capita GDP, the average level of EU countries lags behind any state in the United States except for Idaho and Mississippi.

The question of why Europe has become poor is worth pondering.

Economic consecutive difficulties

The Wall Street Journal reported that since the 2008 international financial crisis, the total economic output of the eurozone has only increased by 6%, while the US economy has grown by a cumulative 82% during the same period. Over the past 15 years, the size of the eurozone economy has grown from almost equivalent to that of the United States to nearly double that of the United States.

Behind this phenomenon is the reality that the European economy has been facing consecutive difficulties in recent years.

Under the impact of the COVID-19, the GDP of the Eurozone fell 11.8% month on month in the second quarter of 2020, the most serious contraction since 1995. In that year, the total economic output of the Eurozone and the European Union decreased by 6.8% and 6.4% year-on-year, respectively. In 2021, although the economies of the eurozone and the European Union have recovered, they have not been able to return to pre pandemic levels.

In February 2022, the Ukrainian crisis escalated and the European economy was once again significantly impacted. In the second half of last year, energy prices and inflation rates soared in several EU member states. According to Eurostat data, the Eurozone's GDP grew zero month on month in the fourth quarter of last year, while the EU's GDP shrank by 0.1% month on month.

Since the beginning of this year, European economic growth has been hovering on the brink of stagnation. In the first quarter, the GDP of the Eurozone increased by 0.1% month on month, while the GDP of the European Union increased by 0.3% month on month. Domestic demand in many countries was weak. Most economists predict that the European economy is facing downside risks.

The weak economic growth affects the purchasing power of European society. According to data from the Organization for Economic Cooperation and Development, the current consumption expenditure of the European Union accounts for approximately 18% of global consumption expenditure, while the United States accounts for 28%; 15 years ago, the European Union and the United States each accounted for about a quarter of global consumer spending.

Why did Europe become poor

The European economy is facing difficulties, partly due to the weak economic structural reform, insufficient endogenous growth momentum, and the impact of the pandemic over the long term. Meanwhile, the multiple strikes from the United States cannot be ignored.

The United States is willing to aggressively raise interest rates and introduce protectionist measures such as the Inflation Reduction Act to safeguard its own interests. Due to multiple strategic considerations such as containing Russia, continuing to control Europe, and expanding the energy export market, the United States has stirred up geopolitical conflicts, promoting the decoupling of energy between Russia and Europe, and further exacerbating the economic difficulties in Europe.

The crisis in Ukraine has led to a shortage of energy supply in Europe and a series of chain effects. Russia plays an important role in the supply of natural gas and crude oil in Europe, providing relatively affordable energy for EU countries for many years, which is an important support for their economic growth.

After the escalation of the Ukraine crisis, under the strategic pressure of the United States, the European Union followed the United States in launching multiple rounds of sanctions against Russia, including embargoes on Russian coal, oil products, natural gas, etc., seriously distorting the supply chain and affecting the EU's own economic growth. At the same time, inflation levels in Europe have repeatedly hit new highs, with inflation rates in multiple countries reaching double digits for several consecutive months.

Under the influence of the United States, energy from Russia and Europe is gradually decoupling, and Europe's demand for natural gas from the United States is soaring. According to Kepler, a commodity data analysis company, in 2022, the European Union imported 41% of its total imports of liquefied natural gas from the United States, an increase of 154% compared to the previous year. According to Eurostat data, the EU's imports from the United States increased by 53.5% in 2022, mainly due to increased energy trade and skyrocketing energy prices.

French President Macron has repeatedly criticized the "double standards" of energy prices in the United States, pointing out that the price of liquefied natural gas in the United States to Europe is several times higher than that in the US market. In order to reduce operating costs, multiple aluminum and zinc smelters in Europe were forced to close, a large amount of crude steel production capacity was forced to idle, and the manufacturing industry suffered a major blow.

The United States has also introduced the Inflation Reduction Act, which promotes the production and application of electric vehicles and other green technologies in the United States through measures such as high subsidies. These factors seriously undermine the "vitality" of the European economy, and many major European companies have migrated their production sectors to the United States, posing a risk of "de industrialization" in Europe.

"We are very concerned and shocked that these subsidies are protectionism and that the Americans have stabbed us in the back," exclaimed Olivier Joris, the EU Affairs Director of the Belgian Enterprise Federation

Where is the road ahead

Under the turmoil of the United States in stirring up geopolitical chess, leveraging energy leverage, and initiating protectionist measures, the foundation of Europe's manufacturing industry has been continuously weakened, and exports from major countries have been affected.

The eurozone economy is highly dependent on exports, and expanding foreign economic and trade cooperation has become the best choice for European countries to inject momentum into their economy in the face of weak domestic demand. Therefore, the European Union and major European countries look forward to boosting the economy through deepening economic and trade cooperation with China.

Currently, China and Europe have formed a strong economic symbiotic relationship. In the context of a sluggish world economy and unfavorable trade environment, China Europe trade has achieved counter trend growth. In 2022, China and the European Union were each other's second largest trading partners, with a trade volume of 847.3 billion US dollars, a year-on-year increase of 2.4%. This means that the average trade volume per minute exceeded 1.6 million US dollars, and the trade structure between China and Europe has been further optimized. The trade of green products such as lithium batteries, new energy vehicles, and photovoltaic modules has grown rapidly.

The economic reality prompts European leaders to reflect and adjust policies in a timely manner. Starting from the second half of last year, European leaders conducted intensive diplomatic activities with China.

In early November last year, German Chancellor Scholz stated during his visit to China that he opposed decoupling and would strive to stabilize, consolidate, and develop Germany China relations. At the beginning of December, President Michel of the European Council visited China and expressed his willingness to continue to promote the process of the EU China investment agreement with China, enhance stability and mutual trust in the supply chain, and deepen mutually beneficial cooperation between Europe and China in various fields.

Since this year, Spanish Prime Minister Sanchez, French President Malcolm and European Commission President von der Leyen have come to China to strengthen communication and cooperation. Von der Leyen said that Europe and China are important trading partners of each other and highly linked economically. "Decoupling" with China is not in the interests of the EU and is not a strategic choice of the EU. The EU has independently decided on its policy towards China and is willing to resume high-level economic and trade dialogue with China, promote stable and balanced development of EU China economic and trade relations, and achieve mutual benefit and win-win results.

European companies have expressed that decoupling from China is neither possible nor feasible, while continuing to strengthen the Chinese market. Volkswagen, BMW, Siemens, Airbus and other companies are continuously increasing their investment in China and looking forward to further sharing the dividends of the Chinese economy.

Experts point out that the reality of paying a heavy price for following the United States has made many Europeans realize the importance of adhering to strategic autonomy and multilateral diplomacy. Only by breaking away from the conservative thinking of values, insisting on promoting common interests, and maintaining the correct direction of multilateralism, can Europe find a way out for economic development in unfavorable situations.