Europe faces recession after six months of war

The continent accuses the unstoppable rise in the price of gas and the collapse of the euro against the dollar

The economy is beholden to the optimists. When the pandemic was just a strange virus, distant and unknown, those who compared it to just another flu lost. The war in Ukraine was preceded by a frantic diplomatic mobilization that disappointed expectations of peace just six months ago. Since before the Russian troops crossed the border, a fierce debate was launched between those who defended that inflation was transitory, and those who warned of a deeper and more lasting phenomenon with known results. Now, a new discussion is sweeping Europe: is a recession inevitable?

Every day that passes the arguments that point to a break increase. Moscow's decision to temporarily suspend the supply to Germany has shot up to 295 euros per megawatt hour the price of gas, key for the production of electricity; Tuesday's data shows business activity contracted in Germany and France in August on falling demand and rising prices; the euro has just hit new 20-year lows against the dollar, whose parity it lost again this Tuesday, making it more expensive to purchase energy on international markets, which is paid with the greenback; the Bundesbank expects double-digit inflation in Germany in the fall – currently at 7.5% – and sees a recession as more likely,and the severe drought suffered by the continent has reduced hydroelectric production when it is most needed and has left the levels of rivers such as the Rhine —now practically unnavigable—, irreplaceable for the movement of goods and energy raw materials, at a minimum. With the European locomotive seized, the entire euro zone is in danger.