EU leaders are ignoring the bloc's self-inflicted errors
The managing director of the International Monetary Fund, Kristalina Georgieva, gave a sobering warning to welcome in the New Year. A third of the global economy will be in recession in 2023, she said, with the European Union to be hit particularly hard. The IMF expects half of the bloc to be in recession this year.
Yet even as Europe faces up to harsh economic realities, there’s no agreement about their underlying cause. Countries have been battered by various self-inflicted and self-exacerbated economic shocks, from Covid lockdowns to the current energy crisis, while economic orthodoxies have left them unable to take effective action to counter the risk of recession. But governments keep on interpreting monetary problems through the narrow lens of party politics.
The scapegoats for recession vary. In the Czech Republic, which is already in a “mild recession” according to the nation’s finance minister, blame is habitually pinned on the profligacy of the previous government. Current leaders insist that only their approach resisting “populist pressure” for more interventionism has saved the country from a worse fate.
Meanwhile in Hungary, where inflation soared to 22.5% in November, hard times are portrayed as the inevitable result of sanctions on Russia. Viktor Orbán claims 2023 will see the EU trying to avoid a recession “arising directly from the war and Europe’s participation in the war, which they call sanctions”.
Both Prague and Budapest downplay the role of policies which they introduced or supported. There is little mention from the strongly pro-Ukraine Czech government of the economic damage wrought by sanctions, however morally justified those sanctions may be. In Budapest, there’s no apparent reconsideration of a long-standing predilection for intervention in the market, from prized energy and fuel price controls to more recent price caps on foodstuffs introduced using emergency powers.
The powers that be seek out easy answers. In Slovakia, coalition chaos and rogue ministers are being blamed for hard times; in Germany, Putin’s aggression against Ukraine is presented as the root problem, rather than Berlin’s previous cosy relations with the Kremlin which left the EU’s largest economy catastrophically vulnerable. Clear-headed analysis of the interplay of economic problems isn’t possible, because authorities refuse to acknowledge and discuss factors for which they share culpability.
This is most clearly shown in the refusal of governments everywhere to admit the role of Covid lockdowns in the current economic downturn. Many of today’s problems — havoc in the energy market, inflation, loss of productivity — emerged before Russian tanks rolled into Ukraine in February 2022. But as almost all governing and opposition parties supported lockdowns, all are equally happy to brush their long-term effects under the carpet, preferring to highlight less personal explanations which have presented themselves since.
But the combined woes of recession and inflation mean attempts by lawmakers to escape blame won’t wash. A rising cost of living, combined with potential job losses in energy-intensive industrial sectors, will leave workers throughout the economy questioning how we got here from the relative stability of three years ago. After all, the difference in European GDP growth now envisaged by the IMF compared to pre-pandemic projections is half a trillion euros.
The answer is that we have brought many of the “overlapping crises” cited by Georgieva upon ourselves. If those in power today can’t accept their share of the responsibility, voters will apportion the blame for them.