Why Europe Is So Ill-Prepared For The Next Great Recession

Economic storm clouds are gathering on the horizon. But just because everyone's talking about it doesn't mean governments are ready to deal with it — in fact, quite the opposite.

Horizon 2020
Claus Hulverscheidt


NEW YORK CITY — In 2008, when the most serious financial crisis in 80 years gripped the Western world, politicians and central banks were taken by surprise. Then they leapt into action, putting emergency measures in place, nationalizing companies and initiating bank mergers.

Finance ministers from the G7 countries seemed to be on a permanent conference call. Central banks across the world dropped their base rates, and the G20 leaders rushed to a crisis summit in Washington. As a result they succeeded in coordinating their individual economic rescue plans and introducing new banking regulations. And yet, the economy underwent a dramatic collapse, especially in the United States and Germany.

Nearly a dozen years later, we may be facing the next big economic crisis, only this time everyone can see it coming. If the anticipated collapse of 2020 does occur, it'll be the crisis with the most advance warning ever. A recession foretold. A slow, deliberate descent into chaos.

It's easy to imagine, therefore, that the world's leading economic powers are better prepared than in 2008. But in fact, the opposite is true. The warning lights have been flashing for some time, and yet, instead of using the G7 summit in Biarritz to address the problem head-on, the meeting became just another opportunity for a bit of ego-massaging on the part of the U.S. president.

It'll be the crisis with the most advance warning ever.

During the summit, Donald Trump tweeted that all his fellow leaders were jealous of his country's economic success. What he didn't mention is that he's using American muscle to destroy economic growth worldwide. It's clear that Trump's aggressive trade policies have triggered and exacerbated economic insecurity across the globe. What international company would invest when it may have to throw out all its cost calculations when Trump announces his next tariff changes?

Of course there are other reasons for the slack period — mismanagement of the German car industry, political chaos in the UK and Italy, and the fact that the global upswing simply can't last forever. But the biggest problem by far is an unpredictable president who calls himself "the chosen one" and believes he is above the basic laws of economics.

From Trump's perspective, it's understandable, because he refuses to acknowledge reality. The U.S. economic situation — which so far is holding steady — is his most important argument in the upcoming election, the reason why he claims the American people should grant him a second term. He'll therefore jump on any lie, any conspiracy theory, to show that there is no impending crisis. Either that or — as a Plan B — Trump will insist that it's someone else's fault: the U.S. Federal Bank, the media, the Germans.

Time to cry wolf (of Wall Street) — Photo: Aditya Vyas

This means that the United States, the world's largest economy, can't be counted on to fight against the approaching economic downturn. Europe will thus have to rely on itself to quickly work out its own plan to combat the crisis.

The conditions for this are actually very good: Many countries can now borrow with practically no interest, and the national debt in Germany is the lowest it has been for 15 years. "I can't think of a place in the world today where the argument for fiscal stimulus is stronger than it is for Germany," Jason Furman, former chief economic adviser to Barack Obama, said recently.

Instead of finding strength in numbers, Europe is divided.

This time the U.S. Federal Reserve and European Central Bank will not be able to play the same role in fighting recession as they did in the last crisis. The ECB is still recovering from the euro-zone crisis, and both have taken a political beating from supposed statesmen who are simply looking for a scapegoat rather than a way out of the problem.

Outgoing ECB President Mario Draghi has been most harshly lambasted for his zero interest-rate policy by the country that is sitting on the biggest pile of wealth, but is too miserly to share it out: Germany has been rightly criticized by economists across the world.

Instead of finding strength in numbers, Europe is divided. Germany and France, which used to provide the impetus behind cooperation, are at loggerheads over fundamental questions, while the UK and Italy are self-destructing. In some ways, the situation may even be worse than in 2008, as at least then it was clear that all the major economic powers were prepared to cooperate.

That should be a warning to those in Germany who are celebrating the country's status as the world's leading exporter and forgetting about everyone else. Because no one will come to the country's rescue when it finds itself in crisis — not even "the chosen one."

Support Worldcrunch
We are grateful for reader support to continue our unique mission of delivering in English the best international journalism, regardless of language or geography. Click here to contribute whatever you can. Merci!

Thousands of migrants in Del Rio, Texas, on the border between Mexico and the U.S.

Hannah Steinkopf-Frank, Bertrand Hauger and Anne-Sophie Goninet

👋 Сайн уу*

Welcome to Friday, where the new U.S.-UK-Australia security pact is under fire, Italy becomes the first country to make COVID-19 "green pass" mandatory for all workers, and Prince Philip's will is to be kept secret for 90 years. From Russia, we also look at the government censorship faced by brands that recently tried to promote multiculturalism and inclusiveness in their ads.

[*Sain uu - Mongolian]


• U.S. facing multiple waves of migrants, refugees: The temporary camp, located between Mexico's Ciudad Acuña and Del Rio in Texas, is housing some 10,000 people, largely from Haiti. With few resources, they are forced to wait in squalid conditions and scorching temperatures amidst a surge of migrants attempting to cross into the U.S. Meanwhile, thousands of recently evacuated Afghan refugees wait in limbo at U.S. military bases, both domestic and abroad.

• COVID update: Italy is now the first European country to require vaccination for all public and private sector workers from Oct. 15. The Netherlands will also implement a "corona pass" in the following weeks for restaurants, bars and cultural spaces. When he gives an opening speech at the United Nations General Assembly next week, unvaccinated Brazilian President Jair Bolsonaro will defy New York City authorities, who are requiring jabs for all leaders and diplomats.

• U.S. and UK face global backlash over Australian deal: The U.S. is attempting to diffuse the backlash over the new security pact signed with Australia and the UK, which excludes the European Union. The move has angered France, prompting diplomats to cancel a gala to celebrate ties between the country and the U.S.

• Russian elections: Half of the 450 seats in Duma are will be determined in today's parliamentary race. Despite persistent protests led by imprisoned opposition leader Alexey Navalny, many international monitors and Western governments fear rigged voting will result in President Vladimir Putin's United Russia party maintaining its large majority.

• Somali president halts prime minister's authority: The decision by President Mohamed Abdullahi Mohamed marks the latest escalation in tensions with Prime Minister Mohamed Hussein Roble concerning a murder investigation. The move comes as the Horn of Africa country has fallen into a political crisis driven by militant violence and clashes between clans.

• Astronauts return to Earth after China's longest space mission: Three astronauts spent 90 days at the Tianhe module and arrived safely in the Gobi desert in Inner Mongolia. The Shenzhou-12 mission is the first of crewed missions China has planned for 2021-2022 as it completes its first permanent space station.

• Prince Philip's will to be kept secret for 90 years: A British court has ruled that the will of Prince Philip, the late husband of Britain's Queen Elizabeth who passed away in April at 99 years old, will remain private for at least 90 years to preserve the monarch's "dignity and standing."


With a memorable front-page photo, Argentine daily La Voz reports on the open fight between the country's president Alberto Fernández and vice-president Cristina Kirchner which is paralyzing the government. Kirchner published a letter criticizing the president's administration after several ministers resigned and the government suffered a major defeat in last week's midterm primary election.



An Italian investigation uncovered a series of offers on encrypted "dark web" websites offering to sell fake EU COVID vaccine travel documents. Italy's financial police say its units have seized control of 10 channels on the messaging service Telegram linked to anonymous accounts that were offering the vaccine certificates for up to €150. "Through the internet and through these channels, you can sell things everywhere in the world," finance police officer Gianluca Berruti told Euronews.


In Russia, brands advertising diversity are under attack

Russian sushi delivery Yobidoyobi removed an advertisement with a Black man and apologized for offending the Russian nation, while a grocery chain was attacked for featuring an LGBTQ couple, reports Moscow-based daily Kommersant.

❌ "On behalf of the entire company, we want to apologize for offending the public with our photos..." reads a recent statement by Russian sushi delivery Yobidoyobi after publishing an advertisement that included a photograph of a Black man. Shortly after, the company's co-founder, Konstantin Zimen, said people on social media were accusing Yobidoyobi of promoting multiculturalism. Another recent case involved grocery store chain VkusVill, which released advertising material featuring a lesbian couple. The company soon began to receive threats and quickly apologized and removed the text and apologized.

🏳️🌈 For the real life family featured in the ad, they have taken refuge in Spain, after their emails and cell phone numbers were leaked. "We were happy to express ourselves as a family because LGBTQ people are often alone and abandoned by their families in Russia," Mila, one of the daughters in the ad, explained in a recent interview with El Pais.

🇷🇺 It is already common in Russia to talk about "spiritual bonds," a common designation for the spiritual foundations that unite modern Russian society, harkening back to the Old Empire as the last Orthodox frontier. The expression has been mocked as an internet meme and is widely used in public rhetoric. For opponents, this meme is a reason for irony and ridicule. Patriots take spiritual bonds very seriously: The government has decided to focus on strengthening these links and the mission has become more important than protecting basic human rights.Russian sushi delivery Yobidoyobi removed an advertisement with a Black man and apologized for offending the Russian nation, while a grocery chain was attacked for featuring an LGBTQ couple, reports Moscow-based daily Kommersant.

➡️


"Ask the rich countries: Where are Africa's vaccines?"

— During an online conference, Dr. Ayoade Olatunbosun-Alakija, of the African Vaccine Delivery Alliance, implored the international community to do more to inoculate people against COVID-19 in Africa and other developing regions. The World Health Organization estimates that only 3.6% of people living in Africa have been fully vaccinated. The continent is home to 17% of the world population, but only 2% of the nearly six billion shots administered so far have been given in Africa, according to the W.H.O.

✍️ Newsletter by Hannah Steinkopf-Frank, Bertrand Hauger and Anne-Sophie Goninet

Support Worldcrunch
We are grateful for reader support to continue our unique mission of delivering in English the best international journalism, regardless of language or geography. Click here to contribute whatever you can. Merci!