In some ways, today’s adversity is harder to deal with than the EU. compared to the euro crisis ten years ago. Then the European Central Bank was able to keep interest rates low and buy public debt. This is not an option today as the ECB has just doubled interest rates to 1.5% and other similar moves will follow. In addition, the European Union is facing a structural shock due to high energy prices. Highly developed countries like Germany will have to rebuild their economic models. Tensions between governments are rising. But the crises also have a positive sign for the EU, which by the mid-2030s could have the cheapest and cleanest energy in the world and potentially become stronger geopolitically.

EU leaders. they congratulated themselves when they decided to impose sanctions on Moscow over Ukraine, but did not fully consider the economic consequences of cutting off Russian gas exports. Governments did not pay enough attention to measures to support the population and businesses to soften the blow of higher natural gas prices, and demand did not fall as quickly as it could. Meanwhile, governments have not done enough to prepare citizens for the difficult times ahead, and solidarity within the EU has taken its toll. dissipates, and the risk of populist reactions increases in the coming years. France ruled out the possibility of building a gas pipeline from Spain to the Pyrenees. However, EU leaders have made some progress in resolving their differences. An impressive campaign for more natural gas from third parties, as well as unusually mild weather, helped bring natural gas prices down to a third of the all-time high at the end of August, although they are still five times higher than they were two years ago. . At the same time, E.E. accelerated the shift away from fossil fuels. As a result, from the mid-2030s, it will have cheap and clean energy.

And cheap money has allowed governments to build up debt over the past decade without seriously thinking about how to pay it off. The latest energy subsidies follow huge coronavirus support packages. European leaders are already complaining about high interest rates, and new Italian Prime Minister Giorgia Meloni is criticizing the ECB, but the ECB can’t avoid raising rates even if it wanted to. Inflation in the Eurozone in September amounted to 9.9%. Of course, high inflation has the side benefit of reducing public debt as a percentage of GDP. But if inflationary expectations strengthen, investors will demand higher yields to hold government bonds, further driving up borrowing costs. The bond shock in the UK following ex-Prime Minister Liz Truss’ attempt to ease monetary policy is a useful warning to EU member states. However, it remains difficult for governments to cut spending or cut taxes. They fear a backlash from the voters if they don’t help their population with the rising cost of living. However, the EU institutions will work hard to turn public debt problems into a general crisis. The ECB has pledged to put an end to the spike in interest rates paid by eurozone governments, provided their debts are sustainable.