European countries have no money to mitigate the effects of the energy crisis.
The substantial levels of public debt in several leading countries of the European Union (EU) and the United Kingdom will severely hinder their exit from the energy crisis caused by the war in the Middle East. This is reported by The Wall Street Journal (WSJ).
Unlike the previous economic shocks triggered by the coronavirus pandemic and the onset of hostilities in Ukraine, European countries will find it extremely difficult to emerge from the current crisis. The record levels of debt obligations in recent decades have put EU leaders (France and Germany) and the United Kingdom in a challenging position.
In the current reality, the costs for European businesses (industrialists, agrarians) are likely to continue rising due to the rapid increase in energy prices (oil, gas). Budgetary resources to support struggling sectors may be insufficient under such circumstances. All of this ultimately risks slowing down the already low growth rates of the eurozone economy, which has not yet fully recovered from the consequences of previous crises.
Whereas previously the authorities of the aforementioned countries could allocate significant sums from their budgets to compensate for the negative effects of economic shocks, their financial capabilities are now severely limited. The public debt of the United Kingdom and France has reached record levels not seen in the last 60 years. Meeting these obligations presents a serious challenge due to high interest rates.
In the event of further increases in global oil prices, analyst Neil Shearing warned, the EU economy risks plunging into recession. The entry point into a full-blown crisis for the region, according to the expert, will be raw material prices exceeding $125 per barrel. Currently, prices have already surpassed $105. If the blockade of the Strait of Hormuz drags on for a long time, analysts at Goldman Sachs warned, the price of the benchmark North Sea Brent crude could soar to $145.
