> German economy, among the most exposed to disruptions in Russian gas supply, is "likely" to suffer a recession over the winter if the energy crisis continues to deepen
At this point I feel the EU is pretty much done and the war just showed how weak the EU leadership is along how individual member nations acting sometimes totally against each other (see France doubling down on nuclear while Germany does the opposite). Like I don't see any positive outcome for the Union no matter what happens in the war, unless you see the US having an even greater influence over Europe as a positive thing. Personally I'm extremely pessimistic.
> I don't see any positive outcome for the Union no matter what happens in the war
If you put zero value on European unity, and the security and economic benefits that brings, of course you aren’t going to value the EU. If Texans didn’t care when New York was attacked, it would be reasonable to ask why the U.S. is a thing. For what it’s worth, France building nukes while Germany snubs them is analogous to e.g. Kentucky burning coal while California puts down solar.
I think if the Russians bombed Washington State, the rest of the US would actually help defend it by attacking Russia. While the military help that the EU is giving Ukraine is great, it is far below the level that the other states would provide Washington. I know that isn't exactly your point, but you can't say that Ukraine is as intrinsic to the EU as Washington State is to the rest of the US.
> While the military help that the EU is giving Ukraine is great
It seems adequate. Europe is helping Ukraine and putting pressure for a quick end to the conflict.
The real question is why is the US helping so much to the point Ukraine is refusing to negotiate. Part of me thinks it’s actually advantageous to them to weaken both Russia and the EU.
The US, through NATO, is committed to defending much of Europe and the EU against Russian invasion if they decide to try anything. This war was an opportunity to demonstrate that the price will be too high to for Russia to pay and that they will not be allowed to get away with annexing other European countries, while destroying a large chunk of their military capacity in the process, all without having to actually commit the US military to fighting on the ground like they would if Russia decided to get grabby elsewhere. It is in their direct interests to seize that opportunity.
For sure it’s directly in the interest of the USA in the same way NATO actually keeps Europe subservient and prevent the EU from actually being a power. It’s just the usual raw deal for European countries which are going to have to deal with huge damage to their economies. But we have only ourselves to blame. We should have sent the US packing a long time ago.
If the US were to face Russia in a conventional war, there is a serious risk of nuclear escalation between the world's largest nuclear powers. The current conflict presents the US with an opportunity to weaken Russia by supporting Ukraine, do so with international support, and without contact between US and Russian troops.
KILLING AND DEATHS OF PEOPLE ARE UNACCEPTABLE. FIGHTING SHOULD BE STOPPED IMMEDIATELY AND PERMANENTLY. ALL OPEN QUESTIONS SHOULD BE SOLVED BY FAIR NEGOTIATIONS. BOTH SIDES HAVE TO BE READY FOR COMPROMISES TO SAVE LIVES.
https://scientists-against-war.org/
> BOTH SIDES HAVE TO BE READY FOR COMPROMISES TO SAVE LIVES
I agree with that in principle but I honestly can't see how to achieve that in practice in this situation. Russian leadership currently doesn't seem to care about internation rules. They believe themselves to have a sacrosanct right for greatness and the right to rule and bending to any compromise would be utterly unacceptable in that framing.
I don't think this as an absolutely Russian problem; it's the problem of super-powers that are no more (but still kinda are). I fully expect a similar situation to happen in the future when American will only be a shadow of the power it used to be.
Agreed. I also have a hard time accepting the idea of any concessions to Russia, but I understand the principle of being willing to consider any (morally acceptable) possibility to preserve irreplaceable human lives.
Also agree we’re headed for a multipolar world, with climate change impacting geopolitics in the Northern hemisphere, majority of the global pop. concentrated around SEAsia, and a looming demographic collapse putting pressure on nation states to act now-or-never.
"Russia does not negotiate with terrorists, it destroys them" -- Vladimir Putin, 2004
Ukraine should not negotiate with a terrorist state. The US and the UK are making the correct choices for once. Maybe they finally learned something from WW2?
That’s an interesting question. It would realistically escalate to nuclear war. But I’d we set that aside, it’s not immediately obvious to me how the dollar would do. It might actually strengthen.
Short term positive, long term destructive. Ergo negative.
Addiction to cheap resources prevented politically sustainable energy sector development. On top of that, it's likely that corruption was involved. Which is cancer that tends to cause more corruption in semi-related parts of the system. Once politicians sell out, it's much easier to bend them again. Be it pure greed or blackmailing.
If by short term you mean about 40 years for natural gas and a few decades for everything else, I guess we can agree that it was short-term positive. Although that would make the idea of long-term superfluous :-)
Put another way, if it weren't for USA's hard stance, many large EU economies would have few misgivings about continuing to do business with Russia. And even hardliners like Poland AFAIK are still buying Russian gas through Germany, as do several others including Ukraine.
The reason they're doing that is because they need it, it's there and it's good for keeping their economies and societies in functioning order.
Was there corruption? You bet, former USSR states were and are drowning in it and the West was certainly not spared either. Doesn't change the fact that they need resources though and there's not a lot of alternative suppliers.
This is great for German exports. Expect to see more Mercedes Benz in the streets of America.
It generates some inflation as imports are pegged to the dollar(somebody mentioned that it is hedged, it is just by some extent), but overall is actually good for the economic block. The EU needs to export to survive.
The EU has been fighting a possible deflation for most of the 2010s, this is actually not so negative as people might think.
If ECB would raise interest to the same rate as the FED, Euro would become too strong. Inflation is already decreasing in Germany even with that 0% interest rate.
The main inflation concern is the gas prices for this winter and this isn't fixable with monetary policy. If we have no gas, no amount of money will be able to buy it.
This thesis only holds if MB can afford to keep running its factories. Modern economies cease to function without energy, or when the price of that energy is sufficiently high.
Currency devaluation is basically demanding that workers do more for less. That's great for companies, if those workers accept it and don't jump ship. However some of the brightest Germans I know are in the process of emigrating. They are tired of lockdowns and inflation and everything.
Emigrate, but where? I hear discontent from people from several countries but it's not clear there is any place to go where it is universally "better". Some places are better for some aspects, some places are better for other aspects; but like a short blanket, you pull one end and it uncovers the other end.
Another interesting thing is that many countries are experiencing lower inflation than the US, but their currency is getting weaker, so the USD's purchasing power is increasing two-fold. I've been planning a trip to Malaysia because while their exchange rate against the dollar has fallen, they've only experienced ~3% inflation, so not only are all of their products 22% as expensive, they also haven't meaningfully changed in price since 3 years ago (from the dollar perspective), whereas the dollar's purchasing power in the US is basically down 25%.
> been planning a trip to Malaysia because while their exchange rate against the dollar has fallen, they've only experienced ~3% inflation, so not only are all of their products 22% as expensive, they also haven't meaningfully changed in price since 3 years ago
You’re running a real-goods arbitrage analysis. It’s dicey to compare national inflation statistics for this purpose. They’re measuring separate baskets of goods on different methodologies.
This means you must reconstruct the baskets. As such, you might as well measure the things you’re buying. For traded goods, e.g. grain and fuel, there is unlikely a massive pre-tax spread because professionals are looking at the same data. For non-tradable goods, e.g. hotels and restaurant meals, you might see a yawning gap.
“Let's be honest here: Europe's a museum, Japan's a nursing home and China's a jail. We don't need to worry about those currencies being some kind of major threat to us.” - Larry Summers
Yes, it is indeed good in that it makes European exports more competitive, but on the flip side, imports are more expensive, which can mean inflation and/or increased sensitivity to supply chain disturbances. I’m sure it causes some other problems as well.
I imagine it would be better for an economy that does huge amounts of exporting compared to importing (like China). Europe does a ton of importing so that side of it sucks.
This is a symptom of a much broader story of europe becoming weaker and the euro becoming less valuable. This particular thing affects export prices positively, but its on the backdrop of a bad trend.
A drop of 10% of currency is not enough to offset the other components. Costs for manufacturing are rising fast. PPI (cost of producing) is rising by 20 to 50% in several key EU countries. Lead by energy but also by commodities.
I'd wager most of the raw the materials come from outside of the EU, and there is indeed intense competition for them from outside economic entities (US, China etc). I mean, even if one were to "discover" a huge Lithium deposit in the Harz mountains (let's say), there's no way that is going to get mined. That actually happened in Serbia, not an EU country, and even there they couldn't open a Lithium mine.
In other words Europe depended on its (relatively) strong currency in order to sustain most of its remaining industry, if that currency strength is gone then things will become real bleak.
Or maybe the financialization of the remaining pieces of industry will save us all, even though I have very high doubts about it. In one of their recent issues The Economist was un-ironically suggesting that the people now producing actual fertilisers in Germany should switch careers and become "fertilisers consultants" or some such, seeing as the production process itself will have become too onerous.
Crazy times, wish we had more "experts" with their feet definitely on the ground compared to what it seems we have (or rather we haven't) right now, after all, parts of Europe have been through all this before (I'm from Eastern Europe, I should know), there should be some institutional knowledge about this type of processes.
It's the difference between heating your house to 72 and walking around barefoot, or 68 and wearing a sweater and wearing loafers.
Those are the tradeoffs. Need for indoor heating has a lot of stretch. In Europe, there's a ton of stretch on personal mobility too, since there are viable alternatives for the car.
Europe can weather this crunch a lot better than America.
>It's the difference between heating your house to 72 and walking around barefoot, or 68 and wearing a sweater and wearing loafers.
Someone who actually believes the "just put a sweater on" rhetoric that even those who tried foisting it on the public quickly gave up on.
Be sure to give your sage advice to the Germans and other Europeans who are this winter going to see gas bills rise 200-1000%. We've had, in the past month, a German minister stating that becoming dependent on Russian gas was a "grievous mistake", and that his country is begging for turbines from Canadian custody "with a heavy heart". His government stating that entire industries might "collapse". Rationing of gas announced. Local municipalities planning warm buildings that those without heat in their homes can visit during the winter. These are just a few of the many things that have happened that are part of the greatest German (and thus European) catastrophe in 80 years.
>Those are the tradeoffs. Need for indoor heating has a lot of stretch. In Europe, there's a ton of stretch on personal mobility too, since there are viable alternatives for the car.
It was obvious from your earlier stupendously cringeworthy "Ten years from now, Europeans will drive electric (if they'll drive at all)" comment that you are of that peculiar species known as Homo redditus, the type that believes in everything you read in /r/politics and /r/worldnews, but the above reinforces it.
(No, Virginia, Europe isn't some sort of magical wonderland of public transportation everywhere from Ireland to Estonia to Greece to Portugal. Be sure to tell the rural Spaniard or Frenchman or Irishman how he no longer needs an automobile or two, and to the people commuting into Frankfurt or Milan or Antwerp by car that there's no reason why they've been doing so all this time so need to stop ASAP.)
>Europe can weather this crunch a lot better than America.
This is so, so wrong in every single way that it's hard to believe so much wrongness can be contained in ten words.
Yeah but my understanding is natural gas is the real driver of crisis for Europe right now, esp Germany, but Americans sometimes misunderstand when it's referred to as just "gas"
Yeah, that's fair enough. Sadly the natural gas shortage affects more than just winter heating, in the UK at least it's one of the main factors of the price of electricity. All of this has had a knock on effect that goes way beyond just the price of heating.
Petrol/Diesel is flat to slightly down from a few months back, though it's _way_ higher than it was pre-ukraine.
In Ireland: ~1.50/l for Diesel -> 2.20, now back down to 1.89 or so.
In northern Europe, I saw anywhere between 1.79 and 2.26 late July early Aug. (Including 2.26 and 2.02 on opposite sides of the motorway)
Now I work very close to home, but when I didn't, I'd meet people commuting the other way. If it was no longer profitable to commute, we could either move to be closer to our job or switch jobs to be closer to home.
Are you asking about America? This summer, my wife's friend ($70k/yr) was considering a tradeoff between eating healthy vs supporting her mom's rent.
Going closer to work is not a choice for many as rents closer to work are prohibitively high. Further, a lot of driving is errands and healthcare. I can't even get something to eat without driving 5 mins.
Wow that's really bad - I have like four big supermarkets in 5 min walking distance from my flat and at least 4 convinience stores and even two real old school street markets. And I live on the far outsikrts of my town. And this is the norm here.
How Americans could screw themselves so much and let this happen ?
Sure, for the fools who saw a couple years of two-dollar gas and decided they needed an F-350 to drive to their office job. It's hard to work up any sympathy for them, especially when most of them lived through the gas prices of the Bush years.
Sometimes USD falls and oil prices fall together. The measure of USD is only accurate when measured against oil price, and it helps to precisely say it so as to avoid questions such as "If USD falls against what?"
But I still don’t know what you mean by “USD falls.” It falls relative to what? All the other currencies? Are you relying on some index of “real price” of oil that’s denominated in something other than USD?
Or are you just saying “if oil gets more expensive”? If so, I don’t really see the relevance of mentioning USD exclusively. Either you’re separating the currency from the commodity or you’re not.
The term "USD falls and oil price rises" go together to say that USD falls against oil price. The term "USD falls" alone or "Oil price rises" alone would require a backdrop of measuring against something.
Can someone explain to me how raising interest rates combats inflation? Doesn't it do the opposite? If rates go up, financing becomes more expensive, meaning I'll need more money to do business, meaning I'll have to raise my prices to match?
Here's the theory. The economy is "too hot", there's too much money circulating, and as a result demand increases which drives up prices. By making money more expensive, by raising interest rates, that money is taken out of circulation because it's more expensive and demand decreases which drives down prices. That's how things work in a normal market. Bottom line: economy is too "hot", i.e. high inflation, you raise rates. If you want to "juice" the economy then you lower rates.
The phrase to search is “transmission mechanism of monetary policy”, but generally, your customers’ financing is also more expensive, so they can afford less at current prices, let alone higher ones. Reduced income and increase expense means you cancel investments and lay off staff. The reduced demand for investment goods and workers means less upward pressure on prices.
"Literally" was probably an exaggeration, but they are in a way.
If you deposit $100 with bank A, and they give a loan for $80 to person B, you have $100 to spend and person B has $80, so $180 can float through the economy.
The $80 debt should cancel out person B's surplus, but it kind of doesn't if interest rates are low enough because they'll never actually pay it back.
Every central bank does. If you think the ECB is bad, take a look at Japan. Unfortunately the entire "global financial system" is based on this. But don't call it a ponzi scheme or Serious Economists will tell you why it is totally sustainable.
> Can someone explain to me how raising interest rates combats inflation?
ELI5:
Inflation is directly proportional to the money supply. The more money is circulating, the more things cost.
Money supply is inversely proportional to interest rates. If I could borrow at 0% APR, I will happily borrow a trillion dollars, even if I had no idea what to do with it.
And now the important thing: In modern economies, when people borrow money, that money is magically created out of thin air and added to the money supply.
This means that when interest rates drop, money supply goes up, and inflation goes up.
When interest rates rise, money supply goes down, and inflation goes down.
There's a lag to these effects, and there's a limit to how much interest rates can affect inflation, and there are other factors at play, but this is the bare bones of it.
- Lets say you have a lot of euro. Interest rate is 0 and the US interest rate is 2%. Then you might think of selling euro and buy dollar to get the 2%. Especially if you think that euro/usd will decline further.
- Now let's say your interest rate is even higher now at 10%. A lot of houses in Germany produces something like 3% yearly revenue. So now you might start selling the houses with the same argument, since you could get 10% risk free compared to 3%. Housing prices go down, if you can't raise the rent.. Same effect on business that are doing just small revenue compared to the capital. It doesn't make sense to operate them. They quit -> consume less resources.
- Other effects like people spend less since saving becomes a bit more interesting. Firm's invest less, since the investment has to beat the interest rate.
PS: All that leads to a stronger currency. So your imports become cheaper and that helps a lot to fight inflation.
Inflation occurs when demand is greater than production. This means there is too much cash flowing around. By raising interest rates, you tighten the cash flow : It's harder to get cash from the banks, thus the demand will diminish, and the prices will lower.
I've always had this cognitive dissonance as well. Especially the link between rising interest rates and lowered food prices. I always ask and get ignored.
I suspect it's because that's all they can really do. They are a one trick pony.
Think about it like this. A lot of things are financed via credit/debt. For example, you buy a house, using a mortgage, which has an interest rate.
Some people might be able to finance a $500k house, at 0% interest rate for 30 years. However, with certainty there are fewer people who are able to finance a $500k house, at 10% interest rate for 30 years, as this costs much more. This means, as interest rates rise, fewer people will be able to secure and offer $500k for a house. As fewer people are offering $500k for a house, sellers will struggle more to sell a house for $500k, and eventually, there even comes a point where prices are forced to drop. As for how high interest rates need to get and how long they are in place to cause a decrease in prices, is mostly a guessing game, but eventually it will cause an effect.
Now, that said, initially people might try to raise their prices to offset the increase in financing costs, (and therefore adding to inflation like the parent post thought), but like I said, eventually there comes a point where they just won't find anyone who will buy their higher prices, because no one can afford those higher prices, and therefore prices must come down if transactions are to continue happening at all, and some transactions will surely continue to happen, as some money is better than no money, when you got a liability to pay.
And this also applies to food prices, along with most everything, in very similar but indirectly complex ways, mainly because most transactions in the economy happen via credit, then with actual money/cash. Let alone the fact that all money originates via central bank loans.
There used to be a joke that the model was raise interest rates -> construction projects become unprofitable and get cancelled -> construction workers cannot afford food, reducing demand -> lower prices
In financial markets its pretty simple: When you raise interest rates, you increase the denominator in the DCF calculation, so most assets are repriced downward.
Yeah, the decrease in asset prices is just an unavoidable side effect (and similiarly, the increase in asset prices under the previous low-interest, low-inflation environment was a side effect of attempts to boost inflation and the real economy, not some large scale plot to transfer money to the super wealthy as is often claimed).
Every article about the EUR/USD ratio talks about gas prices.
But the current rise of the Dollar started 15 years ago.
Over these 15 years, it has become more and more apparent, that software is eating the world. And the US keeps extending their lead in this area.
I would not be surprised if that contributes to a long term trend in the EUR/USD ratio.
(I'm sitting in a cafe in Germany, writing this text on laptop made by a US company, running an operating system maintained in the USA, into a browser made in the USA and posting it to a website of a US company.)
The trading cost of a currency is hardly impacted by one industry outperforming.
Financial policies have a much stronger impact when it comes to currencies. Right now, the U.S and the E.U (and its member) are not handling the current rise in inflation the same way, after also not handling the COVID relief efforts in the same way.
Just look at the graph[1] the fall of the EUR as started since January 2021.
No. It's a reflection of how financial markets value regional economies that use / back those currencies.
Over the past 15 years, Europe experienced:
* The Great Recession.
* A Sovereign Debt Crisis which lasted well into 2014.
* Increasing competition from new economies in Asia, mainly China.
* Brexit.
* The Pandemic.
* And now an unprecedented energy crisis.
Also, the EU had expanded swiftly in the '00s allowing many of the former Eastern Bloc countries to join the union. Arguably, one does not simply integrate national economies in a single market zone under a single currency. It takes years to align towards common policies, while dealing with the many challenges posed by cultural and political differences.
Let's not forget that the initial raison d'etre of the EU - such as it was conceived by Schumann and Churchill - was to ensure sustained stability and peace across the continent in the wake of World War II. In a way, the EU has been instrumental in protecting the continent from worse consequences given the turbulent waters the bloc has navigated over the past 15 years. But it hasn't come out of all of that unscathed.
In order for the EU to recover, it needs to invest in infrastructure and people. A massive challenge which is encumbered by the significant debts most European nations have been shouldering thus far.
You, on the other hand, using American technology to connect with the world and assert that "software is eating it", well, that's - historically - just one expression of American hegemonic power after World War II. In regard to the EU that's expressed military - through NATO - and economically through countless trade agreements which have led to tight integration (see: https://policy.trade.ec.europa.eu/eu-trade-relationships-cou...). Proliferation of US technology across the continent is just one expression of that relationship between the EU bloc and the US.
You can do innovation, the problem is scaling up to the mass market. The EU is supposed to be a massive single market at scale to rival the US and China, and in some ways it is, but it still has a fragments cultural and legal landscape. The gravitational pull of the US on European dev talent is really hard to ignore. Every year the cream of European IT graduates move to the US because that's where the big companies and top paying jobs are. It's a powerful self-reinforcing feedback loop.
There are 65k H1-B visas issued every year. The FAANG all have offices in Europe so they can put grads to work there until the visa comes through. Of course some companies are ramping up their dev capacity in Europe due to the shortage of grads in the US, that's why Facebook announced thousands of the devs they're hiring for the Metaverse will be in Europe.
Many people come over on an L1 visa. A U.S. company will higher a foreign worker, have them work in a foreign office for one year, and then they qualify for an L1 visa.
Shouldn't cheaper dev talent mean that it's easier to start a Google etc. competitor? Many of those smart IT graduates also stay in the EU for various reasons, and accept the lower pay.
The point about the market I agree, the EU market is way too fragmented still, but it's slowly getting there.
I think it’s intrinsic to the models. The U.S. pays top performers better. But the average European has a more-stable lifestyle. The same regulations and labor protections that grant that stability slow down growth, so apart from an internal restructuring it’s tough to see the situation changing.
There is also a hub effect aside from pay. Shannen has all the electronics companies because it is a huge where you can buy anything. A hub can happen randomly outside of policy, like a crystal growing in solution (and it can also be triggered if there isnt one, like dipping a string into super saturated cooled solution).
Remote work is kind of in the process of dissolving the crystallization for software.
You can't. If your people do not feel the need to live humbly and serve their country they are going to flock elsewhere to the highest bidder. If a German engineer finds $30k/y after tax to be an unacceptable salary what are you going to do about it? Brainwash him into sacrificing for their glorious Fatherland and just shutting up and doing the work?
Uh, you forget that those US companies make a profit off of those engineers! How you break the cycle is simple: you find a way to pay those engineers more, so they stay at home AND you put the profit in your pocket. There are plenty of large companies in the EU that could do this.
But they don't. They're too cheap, or perhaps EU style managers can't stand the idea that some people in the same company as them make half as much as they do.
Nobody is willing to pay the price difference, that's why scaling up big tech in Europe natively doesn't happen. If someone were paying it, then we would have big tech natively in Europe, and we haven't.
Competitors to Microsoft, Apple, Google, Facebook, Amazon/AWS, Netflix. The only thing we have that's even vaguely comparable that started in Europe is Spotify and it's 1/3 the size of Netflix, which itself is the smallest of the US tech giants.
You have listed many companies that do many different things so I don't really know what you mean. But in any case, how would a natively European competitor benefit Europe? Are we talking about money, jobs or what exactly?
Money, jobs, IP, skills, influence. As I pointed out in another thread, Europe loses a lot of top IT/CS graduates to the US every year because they can earn 3x to 5x the money.
Please burst your bubble and consider that there is WAY more going on in the world than tech and software. The idea that you can point at something as complex as monetary economics and say "I know what's happening and I can trace it back to 15 years" is absurd and over-simplistic.
No big sector has seen similar level of YoY growth like tech. STOXX 600 is almost flat for last 20 years. While S and P 500 and Nasdaq rose 5-10 times over that period. While tech is not everything for the economy, it seems tech is everything for economy growth in past 30 or so years.
But stock growth and economic growth doesn't necessarily go hand in hand. Much of the stock market growth came from Central Bank policy.
Stock market growth is also something that isn't necessarily benefitting the country where a stock is listed. A european investor can buy Apple stock and participate the same was an an American one.
For me (as an average citizen) the growth the US stock market was the easiest (and probably the only) way to keep at least some value of my money...
(Not all, because my real basket of goods is very different than what is used to calculate inflation...)
There is not, and never has been, anything going on in the world of monetary economics other than tech. Going back thousands of years.
"Tech" is a force multiplier, whether that tech is factories, steam engines, gunpowder, chariots, printing presses, or software. The people who have the best mastery of the currently-most-useful force-multiplier tech at a given time tend to do very well.
Software, broadly, just currently happens to be the most useful force multiplier. That may change to the subset of software that is ML, or it may change to robotics, or something else entirely like synthetic bio.
Honestly, There probably needs to be a Federal type government for Europe, much as the US is setup. The EU kind of reminds me of the US when the US was run under the Articles of Confederation before the current Federal system was adopted. It was very messy.
Said like an American. Believing that the oldest, creakiest, least efficient democratic system of government in the world ought to be exported. Europeans are not looking at the US for democratic inspiration; they are looking inward, and good for them.
* The US had a single national language (despite regional linguistic minorities). In the EU, the closest would be English, which is the universal second language but very few people’s first language.
* Relatedly, the US in 1789 was very culturally homogenous by modern standards. Europe is not.
* The wealth disparity between countries inside the EU is absolutely massive. Federation would lead to unfathomably massive wealth transfers from the North and West to East and South. This would lead to resentment and rekindled nationalism that would create extreme political strife and tear the whole continent apart.
I think the only real problem in this list is convincing countries to adopt English (people tend to be self-important).
Culturally, EU is quite homogenous. There may be 1-2 small countries with moderately different approach, but if you compare to the rest of the world, it is basically the same.
The wealth disparity in the US does not cause what you describe, so why would it happen in EU?
The disparity is much greater among EU countries. The average Bulgarian income, for example, is well below bare survival income in Western Europe. US geographic disparities are much smaller, and less geographic than racial (which then bears out geographically through different demographic mixes). Also, for the first 150 years of existence, the US was not a federal welfare state. The federal government was even limited to taxing states at an equal per capita rate until after the 16th amendment, ratified in 1909.
Sure, no world war. But Russia has lost 45.000 people (roughly the same as US combat deaths in Vietnam) and 2000 tanks.
Most European powers are involved with weapon deliveries and target of economic warfare as well as targetting Russia. Several European states are targetted with cyberwarfare attacks.
What's the definition of "major war"? It's the biggest war on the continent since WW2 where two countries with 100,000s of soldiers fight each other with modern weapons.
People tend to forget Yugoslavia, which was really in the heart of Europe and killed about 150k people.
There is a lot of hyperbole about Ukraine, not least because of Russia but so far it is not intrinsically disruptive outside of Ukraine's (and Russia's) borders beyond the disruption to Ukraine's exports (e.g. wheat). The disruption to gas supplies on Europe is mostly self-inflicted and not an intrinsic consequence of the war.
The EU's financial sanctions on Russia were pretty obviously structured to make it as difficult and painful for Russia as possible to stop selling gas to Europe. In particular, the seizure of their foreign reserves - which they were not expecting to happen, and which they were likely counting on to be able to use gas supply as leverage like they have before - means that the only way to get hard currency to spend on things is by continuing to sell gas. Also, what people don't realise is that Russia was clearly preparing to use control of Europe's gas supplies as a weapon even back in 2021, reducing supplies and depleting their storage in a way that couldn't be explained at the time.
Wheat and a few million people who had to leave their country, but yeah, wheat...
It obviously is a major crisis in Europe and has many ramifications, if all your neighbours mysteriously die in the same week it won't affect you personally but you surely will feel down or threatened. If it was just about wheat nobody would care, Ukrainian wheat isn't even exported to EU countries
> It obviously is a major crisis in Europe and has many ramifications, if all your neighbours mysteriously die in the same week it won't affect you personally but you surely will feel down or threatened.
This premise relies on a mysterious, unknown cause though. It's more like your neighbors fighting your other neighbors.
People left early in the war because of panic and because Russia was trying to invade the while of Ukraine. But if we look at the situation now, arguably there is no reason to have refugees outside of Ukraine.
Second thing is that, in any case, the Ukrainian refugees are not disruptive at continent level, though they might be in specific areas near Ukraine.
Of course a war, any war, is disruptive and horrible for the people involved. But we're looking at the macro impact on Europe here.
> People left early in the war because of panic and because Russia was trying to invade the while of Ukraine. But if we look at the situation now, arguably there is no reason to have refugees outside of Ukraine.
Huh? Until Feb you might have said this if you did not believe the intelligence reports on an invasion being prepared, but now when they are actually deeper in Ukranian soil, and scratched near Kiev itself, are you to say they won't try again?
The ruble is so strong because russia cannot spend money anymore because of sanctions.
I'm living in Germany, the biggest problem is the inflation caused by energy prices. It's still lower than in the US or the UK, but people are starting to struggle. Business is going well as Germany is mostly export-driven, but companies don't want to give out rises.
I think it's that Russia is pegging the Ruble to a fixed value of gold and requiring all nations importing from Russia to use Rubles to buy their Russian exports.
The only way to get Rubles to buy your imports is to give Russia gold at the rub-gold exchange rate set by Russia.
This peg, iiuc, is one-way. As in, Russia gives you X rubles for Y gold. You can't, however, redeem your rubles the other way around.
So... is the Ruble really strong? idk.. it all sounds very artificial given exchange is only in one direction.
although looking at the latest google results today, it seems like none of the top results agree on anything that is going on anymore. Hopefully I can track down my original source.
> the Russian state is burning through its foreign reserves to backstop it
Half of Russia’s reserves are sanctioned. They’re earning bumper returns on their energy exports, mainly oil, despite the ~20% discount they’re forced to offer. And they’ve been seizing exporters’ hard currency.
They say they’re down 10% (20% sanctions adjusted) from February [1]. That’s a decrease, but it’s not burning. (Obvious disclaimer: they’re probably lying.)
> They say they’re down 10% (20% sanctions adjusted) from February [1]. That’s a decrease, but it’s not burning. (Obvious disclaimer: they’re probably lying.)
That sounds like burning to me, even at the improbable 10% level.
The ruble isn't strong. You can't sell meaningfully sell it on the open market. When you buy it, the price goes up. When you can't sell it, the price stays up.
But why would one buy it from Russia instead of buying it from someone trying to sell it that can't sell it to Russia? I don't understand how Russia could prevent me from selling the RUB to anyone else? If people are buying from Russia they would like to buy it for cheaper from me, no?
When you want to buy oil from Russia, Russia forces you to perform the transaction with Rubles. Which means you have to buy Rubles from Russia in order to buy oil.
I don't think there's a big pile of Rubles outside of Russia. If I had Rubles I would've offloaded them many months ago because there's a chance they could be completely worthless in the medium-term.
>For people in the EU/UK, how has this currency slide impacted your day to day?
Not at all?
I mean, I guess you could argue which caused which but the real problem here in central Europe are gas and energy prices. Those legitimately doubled and affect personal budgets.
Would you be prepared to say that the 18% inflation [1] isn't completely due to GBP getting weaker than USD? Not being facetious, actually asking the question.
Because I'm sure all the US-based services will soon be updating their prices to match our rapidly weakening currency.
Didn't impact me at all. Inflation does but since I earn above-average, not to a painful degree.
I don't have plans to go on holiday to the USA in the next year or so, don't plan to buy a Tesla, maybe a new Mac which is going to go up in EUR.
I worry about the long-term effects the war will have for us. Europe is resource poor and constantly rising energy prices will hit our industry hard as we cannot easily find domestic sources of energy. I do hope that switching to renewables gets accelerated and will provide us with both cheap energy and new opportunities for industry.
Europe is not resource poor. It was just easier to let Russia and China deal with the environmental costs.
Literally nobody gives a shit if a pipeline in Syberia starts leaking.
Two responses saying "oil and gas are more expensive, but that is other causes"... forgetting that oil and gas are priced in dollars. So the exchange rate is certainly a cause (i.e. 20-30% of recent moves), though agree not the main cause (recent moves are > 100%, mostly due to Russia tightening the pipe).
For totally fungible assets (e.g. stocks) that’s true.
Not so much for gas, where it is sold and bought with a regional restriction. Exchange rates are transparent to the market situation.
The title of this makes me annoyed. What parity? They're both abstract made up units that happened to be even on a random scale for a while. This is financial numerology :-(
(yes, I know there's more content and "this week's currency summary" sounds less fun and I should chill out)
> They're both abstract made up units that happened to be even on a random scale
They are salable assets with a price that people are willing to pay to acquire them. It is no more abstract than a hypothetical report on how a house in New York City is now worth less than a house in Wichita. Numerology implies some kind of mystical force. This is simply observation of measured human behaviour.
Not really, because we have a sense of how big a house should be. With outliers, it's a building large enough to house a single household. Houses in a given area will be within one order of magnitude in their prices.
It's more like saying "a building in New York is now worth less than a business headquartered in Wichita".
> It's more like saying "a building in New York is now worth less than a business headquartered in Wichita".
Sure. There's no difference. A salable asset is a salable asset is a salable asset. They are all freely traded amongst each other. You can trade that business in Wichita to acquire the building in New York (along with some extras to reach parity in the transaction), just as you can trade your USD to acquire EUR (with some extras to reach parity in the transaction). If two assets have value parity, the trade can take place without any extras.
Comparisons of similar assets (currencies in different countries, houses in different cities) tends to be more interesting for reporting, though. If you are vacationing in a different country you're probably not going to trade your house for the foreign currency. You're typically going to trade your own locale's currency. Likewise, if you're moving to another city, you're probably going to trade your house in your origin city for one in the destination city, not your collection of comic books.
You could trade your house for foreign currency needed while on vacation and your comic book collection for a house when you move to New York City, but it is not nearly as common as trading similar assets when moving about the world. The media needs to attract a wide audience, so common behaviour is significant. Unfortunately, the beloved Comic Book Collector's Homebuying Guide Weekly didn't find the readership necessary to remain in business.
I suppose "Euro falls to historic low against dollar" might have sufficed as a headline, but highlighting the relative values and the 1:1 threshold that was crossed (no matter how abstract it technically is) could help more readers connect with the story a bit more
I checked the EURUSD rate on Yahoo Finance, selected "MAX" for the date range, saw that it started @ 2004 which sounded about right. But thinking now I guess it launched a couple years prior and could easily have been lower back then.
The Euro had two predecessors (kinda) - the European Unit of Account and the European Currency Unit. They weren’t day to day currencies, but they were used for things like cross-border bonds. The EUA was originally defined to be one dollar worth of gold back in the gold standard days.
Each transition saw a 1:1 conversion with fluctuation - usually to benefit the EUA/ECU/Euro - along the way.
And it turns out that the reason a Euro is roughly a dollar is because it's the successor to the ECU, which was the successor to something called the European Unit of Account, which was originally defined to be a dollar's worth of gold. (I figured this out when I went down a Wikipedia rabbit hole last month: https://gottwurfelt.com/2022/07/16/why-is-a-euro-close-to-a-...
> Doesn't "historic low" mean "lowest it ever was in history"?
No, not AFAICS. Because if that were so, then "this historic event" could only mean one single event, the most historic event ever. That's obviously nonsense; there are / have been many historic events. And if there can be many of those, there can also be at least several historic lows.
Might as well get annoyed at people for celebrating anniversaries. It turns out that noting arbitrary patterns in numbers is just a common way to observe changes in continuously-measured values.
Given that they are both traded, they're really "abstract made up units" at least no more than than anything else you buy is. There is an enormous market consensus that determines the value of dollars and euros.
The key takeaway given that is that the market is either losing confidence in the eurozone, gaining confidence in the US, or most likely; both.
Correct, every other traded value has the same meaningless in reality, but psychologically cute thresholds. Same as articles about some stock price crossing a (round number).
If newspapers weren't allowed to report on abstract concepts I don't think we'd ever get any financial news. What is a dollar or a stock or bond or legal contract anyway?
It's just a psychological threshold, but because I don't follow currency markets that closely, it makes it very evident to me that the euro has fallen below a threshold, against the dollar, that it never had gone down to.
> EUA was exchanged 1:1 for ECU, then 1:1 for EUR, so that's a nice continuation.
Interesting, I didn't know that. We did something similar here in Brazil to get rid of the hyperinflation: the Real (which started at 1:1 with the USD) was preceded by the URV, an accounting measure which was used to denominate all prices; during that time, the prices continued to inflate in the former currency, but were mostly fixed in URV, so when the currency changed from Cruzeiro Real to Real (at 1:1 with the URV), the prices stopped inflating so much. Of course, that was not the only thing the Plano Real did to get rid of the hyperinflation, but it got rid of an important "inertial" component of the inflation, in which prices inflated daily because they had always inflated daily.
>Fairly certain that Germany pushed for the value with an easy conversion (2 Deutsche Mark = 1 EUR) and not for dollar-similarity.
>Exchange rate was 1 EUR for 1,95583 DM
I don't think so, the same happened for the old Lira in Italy, 1,936.27=1 €, that everyone rounded to 2,000=1 €, or for the Portuguese Escudo, around 200=1 €, it should be just a coincidence:
And then some sellers converted 1000 Lire = 1€. I still remember looking at shop windows and seeing everything doubling in price. Instant inflation and instant poverty....
The headline is "Gas crisis sends euro back below parity against dollar."
Yet the article does not explain how a "gas crisis" leads to a weaker currency.
What does lead to a weaker currency? On the EU side, central bank accommodation in the face of inflation ripping higher. Germany recently logged a 37% YoY annual increase in producer prices:
And the ECB has done basically nothing about it. Deeply negative real rates and little indication that the ECB has the stomach for any substantive action.
On the US side, there have been sizable interest rate hikes, which will continue at least until the midterm elections get underway. Real rates are still deeply negative.
That difference in rates attracts a lot of capital that might otherwise be parked on the EU side.
The US doesn't need to be a pillar of financial responsibility to attract the world's capital. It just has to be the cleanest dirty shirt in the hamper.
The ECB has its hands tied behind its back, perfect storms like this highlight one of the benefits of a country having its own currency and fiscal policy - the ECB cannot move like UK/US as reconciling Greece/Italy and Germany/Northern Europe can't be done without massive pain for the south.
On the other hand though, the Eurozone population pretty much equals that of the US, and surely there are a bit underdeveloped US states compared to the overdeveloped ones, right? So why is the EU bad idea and the US is not?
Because US is a transfer union. In EU you have a lot of transfer unions within individual states (eg. East-West germany, North-south italy). When a greek moves to germany for work, the money does not flow between the two countries
How do you mean? Euro transfers within the EU work like domestic ones, it's a rule. I've moved a few EU countries in recent years and I've been able to use the same bank (Revolut) for everything everywhere I moved.
If you mean transfer as regards banking, the whole EU (plus EFTA and the UK) are covered by the Single Euro Payments Area, within which all bank transfers must be subject to the same rules and fees as national ones (notwithstanding currency exchange fees if applicable).
If you mean transfer in a more abstract fiscal sense, not even individual EU states themselves are homogeneous regarding their internal fiscal policies. Some are federal, such as Germany, and some are highly centralised, such as France. Then you have the case of Spain where all 17 autonomous communities (≈pseudofederal states) have a small leeway regarding income tax and must follow the baseline central policy, but two regions in particular—the Basque Country and Navarre—have fully devolved powers regarding taxation due to "fueros", i.e. historical rights.
It's about fiscal policy. The EU has no unified fiscal policy. It can't raise taxes for transfers from north to south.
Almost every economist said in 98 that the euro is a bad idea. And it is for the south of Europe. It's great for the north and Germany especially, but for the south it is and has a killer.
In my opinion, the Euro will ultimately break the current EU.
The difference in per-capita GDP between the poorest and wealthiest US states is small compared to EU nations. I did some quick research:
Luxembourg GDP Per Capita: 114,370
Ireland GDP Per Capita: 83,990
-----
Romania GDP Per Capita: 12,510
Bulgaria GDP Per Capita: 9,850
vs:
New York GDP Per Capita: 93,463
-----
Mississippi GDP Per Capita: 42,411
Yes, NY transfers wealth to Mississippi but the scale of transfer and the relative number of wealthy states vs poor (there's like 5 in the deep south) means the dynamic is completely different. Without significant development in ex-Soviet states I'm not sure how the EU can hold together longterm.
Luxembourg is extremely small, and Ireland's GDP is artificially high due to tax evasion by multinationals. Excluding those, the richest country in the Eurozone is Denmark, at $61000 per capita, and the poorest is Poland, at almost $16000 per capita.
Poland is not in the Eurozone, and as I said in the sibling comment, neither is Romania or Bulgaria. Eurozone is mostly wealthy countries, so the parent commenter's argument doesn't work here.
Rich countries in the north especially Germany put in place policies akin to dumping and were shielded from the effects it should have had on their money by the economic gap with the poorer countries in the south. Southern countries found themselves handicapped by an overvalued currency. Meanwhile politicians in the north refused any form of transfers and keep popularising the idea that southern countries are poorer because they lack discipline.
Currency fluctuations don’t allow for global trade.
That’s why after WW2, the Bretton-Woods system was established with fixed exchange rates. After that came to its end, Europe created a new system. Rates were not pegged to gold but to other European currencies (only 2% deviation allowed, 6% for Italy and Britain).
That created a problem for countries that couldn’t keep up with the German economy: Stabilizing the exchange rate was getting very expensive for those countries. Germany started with zero gold reserves after WW2 and now has second place because of this system.
The solution: a common currency. Germany gave up the privilege of getting paid for their strong currency so weak currency countries could stay in the system. A lot of money for an economically integrated Europe. Italy gave up some sovereignty over the money supply and pledged not to spend too much.
Even without the euro, Italy had an “overvalued currency” that held it back because it kept devaluing its currency with no economic growth and, yes, no financial discipline (although, of course, Italians don’t lack discipline). The introduction of the euro relieved Italy of much of the burden.
While I agree that there was a lot of populist rhetoric in the northern countries, pretending that the euro is bad for Italy and good for Germany is also populistic. The reverse is true.
If you mean fixed exchange rates (going back to the 70s) are bad for Italy then one can discuss that. (But there’s a lot of economic literature against that – just imagine California and Kentucky had different and free-floating currencies and how trade would be impaired)
> Currency fluctuations don’t allow for global trade.
I’m glade to learn every country in the world with their own currency can’t participate in global trade. Obviously fluctuation is not an issue for trading.
I’m guessing that by the pegging to each other you are mentioning the ECU and European Exchange Rate Mechanism. Its goal had very little to do with trade. It was mostly an attempt to avoid speculation and large monetary fluctuations which made debt management more costly for countries. It collapsed extremely fast and the southern countries were amongst the first to exit the system for reasons which are very close to why the euro is so poor for them.
> The solution: a common currency. Germany gave up the privilege of getting paid for their strong currency so weak currency countries could stay in the system.
A strong currency is detrimental to a country export. I’m not even addressing the rest of the paragraph as it doesn’t make much sense. Why are singling Italy by the way? The problem is the same for Spain, Portugal, Greece, in some measure Ireland and even somewhat impact France.
You are also completely failing to address the distortion of the German economy which are a large part of the issues especially after Hartz IV. If you take a look at the German wage levels, saving rates and trade balance, you will see that their money should be much stronger than the euro is.
They've had thirteen years to stop their Wile E Coyote approach to fiscal policy and they've chosen not to do so because they wanted to ride the gravy train a little while longer. End of the line.
Thank you, we appreciate it. Specially when just a few weeks ago Central Europe wanted the south to be solitary with the rest of Europe and save gas, gas they don't get from Russia and always paid more for.
This is why the EU is a stupid idea. When it is the south, they should suffer, when it is Central Europe, everyone should come together and sing kumbaya
The EU is a great idea, implemented in a way that leaves a lot to be desired. It certainly is a lot better than what came before, the economic gains are felt everywhere but not equally so. That's the thing that should change, unfortunately such change takes time.
Not so fast. The ECB should have raised rates like the Fed, but didn't to accommodate the Southern EMU members. If what you are claiming was true, the ECB would have just gone ahead and leave the south to fend for itself. Instead their policy is adding fuel to the inflation inferno to protect the south.
They're not wasting money. They simply don't have the massive wealth of the North to jump off from or to cushion blows. On top of that a large quantity of what they do earn is spent on interest payments to the North.
They don't have this wealth because when they were given access to interest rates much lower than what they would have under independent central banks / currencies they went and spent it on consumer goods instead of investing into capital.
They don’t have this wealth because their ability to export is severely hampered by their money in order to shield the German from the consequences of their stupid working laws and boost Germany unsustainable trade balance.
I really wish the south acted like the north is acting now when Germany was considered the sick part of Europe in the 90s. We would have avoided so much trouble.
I am from the south. We are wasting money and producing too little. We don't have the massive wealth of the north because we are culturally incapable of behaving some other way.
i'm sorry but this is plain ignorance. chalking up the performance of a collection of european economies to just "it's cultural" is being, at best, ignorant.
is the cultural problem an important factor? as someone who's also from the south, yes, i think it is. is it the only one (that matters)? no.
the eu (and the euro) works mainly to provide a cheap-access market for the stronger economies to a series of other countries. it's extremely difficult for poorer economies to compete with the stronger ones (due to regulations, size and how those two interplay). it's even more difficult for those economies to provide the same quality of life (i.e. higher salaries, same level of social care, etc.) when they themselves don't have full control of their economy/market.
It's like the US: young people move from poor states to rich ones. Nobody in America ever talks about the basket case that is Alabama. People have been moving into New York and California for a hundred years.
Anecdotal: My dentist was from Rumenia. I'm sure they need dentists too but he can make more money in the Netherlands.
I'm from the south too. Our engineers are all over the north, proving to everyone that we have the brainpower to build some of the best systems in the world.
There are pending issues related to management, but also north-enforced market control (milk cuotas come to mind) that definitely have affected the economy.
Significant part of it is also deepened de-industrialization.
The entire western world but Germany experienced it. Doesn't have much with a culture or just south culture.
Even in Germany, parts that lost industries decades ago are still borer that the rest of country. France and Belgium have similar problems and Italy north-south split is even older.
Nobody know how to reverse it or at least succeeded. This is not easy.
Ironically they've already been in pain since 2008. But within the eurozone they can't escape the trap of having a strong currency (relative to themselves), combined with a terrible economy with massive debt.
The euro just cannot work in the long run. The sooner people up top admit this the better for 300m europeans. But they will never admit defeat.
> Deeply negative real rates and little indication that the ECB has the stomach for any substantive action.
You can't have positive real rates AND pump up the real estate bubble.
There are two parts to growth - population and actual growth.
The majority of "actual" GDP growth for the last 20 years in the West has been people paying more money (inflation adjusted) for the same land.
Why? Because you could! Interest only went lower.
Positive real yields mean people need to actually work instead of speculate on real estate. Most people would rather just speculate on real estate. It's so much easier.
Unfortunately, it's a zero sum game. The losers are renters.
I agree that the losers are renters, at least for now. Although it does speak volumes that at the current stage professional investors in Germany are expected to shift investments into bonds because the yield will likely be higher. It's still popular with small scale investors but I doubt that many people are really familiar with the possible risks.
That said I'm curious how things will develop. Now that U.K. expects up to 18% inflation I wonder if the price-salary-real estate spiral in the metropoles can keep up its momentum.
You seem to be implying or assuming that increased real estate prices lead to increased rent, but that's a non-sequitor; in fact, rents have become decoupled from real estate prices in many areas over the past 20 years.
I find this incredibly hard to believe, especially when it's not hard to find people that buy houses for the sole purpose of renting them out[0]. In order to ensure you at least break even in the short term, you'd need to charge a rent at least equal to the mortgage + property tax.
Negative cash-flow real estate (anywhere with absurd Price-to-Rent ratios) has DESTROYED the S&P 500 (on leverage) for the last 20 years because of abnormally high appreciation (leveraged) due to interest rates perpetually decreasing.
Most R/E is leveraged.
Historically, you did not need positive cash-flow in R/E to make a fortune, and a lot of the fortunes amassed came from negative cash-flow R/E that consistently become more and more negative cash-flowing...
It doesn't really make any sense unless you believe interest rates will perpetually get lower. Anyone who took that trade over the last 20 years did very well.
Much more expensive gas means the German economy goes kaboom, which is exactly what is now happening (afaik Germany recently had the biggest trade deficit in 30 years or something). The EU economy as a whole largely, largely depends on the German economy. The Euro is the currency behind most of that EU economy.
> the article does not explain how a "gas crisis" leads to a weaker currency.
> What does lead to a weaker currency? On the EU side, central bank accommodation in the face of inflation ripping higher. Germany recently logged a 37% YoY annual increase in producer prices:
The producer prices are rising because of the gas prices
> The headline is "Gas crisis sends euro back below parity against dollar."
> Yet the article does not explain how a "gas crisis" leads to a weaker currency.
It wasn’t clear (at least for me) why gas has such an impact on the economy as a whole because many articles concentrate the debate on the private households heating only.
But currently, most of the gas is used in the industrial sector (chemicals, power supply, food preparation), also for electricity generation and for producing materials such as ammonia, plastics, methanol and hydrogen.
But it's nowhere near the braking point, in fact it isn't nearly as bad as the PBOC or, arguably, the BOJ and the FED (per person EU debt is still less than the US), so they definitely still have the option to kick the can down the road.
Ergo, you can safely bet both your kidneys that nothing's going to happen.
It's crazy how hard it is to make 1 European country agree on finances these days, all the EU member nations agreeing to seriously tighten is about as likely as the President of the US declaring he is an alien.
Switching to private pensions is difficult because it would only work for the younger part of the population who would still have enough time to save/invest money for their pension, but the state would still have to finance the pensions for the older half for a couple of decades, without getting fresh money in from the younger half. This is made even more difficult by an aging demographics.
What will have to give is the welfare state. Difficult to see how a retirement age in the early 60's is sustainable given this level of inflation. Better to abandon pensions entirely and just offer disability stipends for those who cannot work due to advanced age.
Returning several million net-negative economic migrants to their home regions would also be necessary.
Yet the article does not explain how a "gas crisis" leads to a weaker currency.
One thing I find weird (a touchy point?) is that the UK left. Yes, that was a few years ago, but my point is historical EU / Euro pricing is now diminished overall, in its up/down cycle.
COVID threw this asunder, so we did not see true fiscal results from UK leaving. And the UK left over a few years, making the departure less dramatic.
Comparing the EU (18T) to the UK (3.4T) shows some impact here, around 20%. If the UK was still in the EU, I'd say the Euro wouldn't have dropped below parity.
Parity is an "OMG!" marker, and can cause cascading changes in perception to the strength of fiscal objects.
The UK wasn't in the Euro, and isn't the answer to Europe's issues with gas prices or interest rates. Sterling has fallen similarly against the dollar for the same reasons (and had a larger trend fall from a higher peak in the longer term). Brexit doesn't help anybody with the current situation, but it doesn't have much to do with it.
Germany and Russia playing a Kindergarten war with Nordstream. Putin throttles Nordstream-1 and says he'd supply via Nordstream-2. Germany refuses to open Nordstream-2.
For Germany, apparently gas flowing through Nordstream-1 is ideologically pure, but gas flowing through Nordstream-2 is evil.
The West will continue to celebrate its hawkish Ukraine policies as a success. Looks like Taiwan will be the next success.
At this point I feel the EU is pretty much done and the war just showed how weak the EU leadership is along how individual member nations acting sometimes totally against each other (see France doubling down on nuclear while Germany does the opposite). Like I don't see any positive outcome for the Union no matter what happens in the war, unless you see the US having an even greater influence over Europe as a positive thing. Personally I'm extremely pessimistic.