Europe Frozen Out

Frozen out is not solely a reference to the problem Europe is going to have keeping their people warm. Though that is going to be a very big part of this problem.

Frozen out refers to the reality that Europe is being ‘frozen out’ of it’s industry and the ability for people to have paying jobs.

The US is reducing Europe to a colony. The colony it has long planned for it to be.

There is a growing fear that the recasting of the global energy system, American economic populism and geopolitical rifts threaten the long-run competitiveness of the European Union and non-members, including Britain. It is not just the continent’s prosperity that is at risk, the health of the transatlantic alliance is, too.

Gas prices are six times higher than their long-run average.

Europe’s gas storage will need to be refilled once again in 2023, this time without any piped Russian gas whatsoever.

The Economist ignores the reality that the western sanctions and the sabotage of north stream pipelines are the reason Europe is in this mess

Deaths due to a lack of affordable energy has been a problem for many years in Britain, as an example, for years now.

Our modelling suggests that, in a normal winter, a 10% rise in real energy prices is associated with a 0.6% increase in deaths. Hence the energy crunch this year could cause over 100,000 extra deaths of elderly people across Europe.

Energy inflation is spilling over into the rest of Europe’s economy, creating an acute dilemma for the European Central Bank. It needs to raise interest rates to control prices. But if it goes too far it could destabilise the euro zone’s weaker members

Even as the energy crisis rages, the war has exposed a vulnerability in Europe’s business model. Too many of Europe’s industrial firms, especially German ones, have relied on abundant energy inputs from Russia. Plenty of companies have also become more dependent on another autocracy, China, as an end market. The prospect of severed relations with Russia, structurally higher costs and a decoupling of the West and China has meant a reckoning in many boardrooms.
That fear has been amplified by America’s economic nationalism which threatens to draw activity across the Atlantic in a whirlwind of subsidies and protectionism. President Joe Biden’s Inflation Reduction Act involves $400bn of handouts for energy, manufacturing and transport and includes make-in-America provisions.

As the other two pillars of the world economy become more interventionist and protectionist, Europe, with its quaint insistence on upholding World Trade Organisation rules on free trade, looks like a sucker.

Already, companies are reacting to the subsidies. Northvolt, a prized Swedish battery startup, has said that it wants to expand production in America. Iberdrola, a Spanish energy company, is investing twice as much in America as in the European Union. Many bosses warn that the combination of expensive energy and American subsidies leaves Europe at risk of mass deindustrialisation. BASF, a German chemicals giant, recently unveiled plans to shrink its European operations “permanently”

Losing investment makes Europe poorer and feeds into a sense of declining economic vigour. Compared with its pre-covid gdp trajectory, Europe has done worse than any other economic bloc. Of the world’s 100 most valuable firms, only 14 are European. Politicians will be tempted to chuck out the rule book and respond with subsidies of their own in an escalating arms race of corporate goodies. Germany’s economy minister has accused America of “hoovering up investments”. President Emmanuel Macron of France has called for “a European wake-up”.

Thus the subsidy row is also feeding tensions between America and Europe

To avoid a dangerous rift, America must see the bigger picture. Mr Biden’s protectionism threatens to drain Europe of vitality

Besides admiration and alarm, the other emotion governing transatlantic relations is frustration. America is irritated by Europe’s economic torpor and its failure to defend itself; Europe is outraged by America’s economic populism. But just as Europe must not be divided by the war, so it is vital that the most powerful democratic alliance in history adapts—and endures.

It’s going to be difficult for Europe to remain unified and vital when the US is intentionally robbing it of the ability to live and thrive. This is a topic repeatedly reported on/discussed here.

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