The European Commission’s monthly confidence index fell to -28.8 in September, Bloomberg reports. This is well below the expectations of economists, who had forecast -25.5. Of course, there is nothing to be surprised here: one has only to look at the statistics on inflation, which has risen to highs for several decades, and on the astronomical electricity bills for both households and businesses.
Naturally, in times of crisis, pessimistic moods prevail over optimistic ones. Here and now, consumer sentiment in the eurozone fell to a record low, as evidenced by the indicator of confidence. It is obvious that with the approach of winter and the onset of cold weather, the anti-records for consumer sentiment will be updated again and, it is possible, more than once.
Economists have no doubt that in the coming months the eurozone, which includes 19 European countries with a single currency – the euro, will plunge into recession. The authorities are not asleep and are actively developing measures to support the population, especially the most vulnerable groups. However, their means and forces are not unlimited, because governments need to think about supporting business and the economy. A striking example in this regard is the German energy giant Uniper SE, which found itself on the verge of bankruptcy after a sharp reduction in Russian gas supplies. In order not to spend the winter without Uniper, Berlin decided to nationalize the company. The nationalization will cost German taxpayers almost 30 billion euros.
After Russia drastically cut gas supplies to Germany and the rest of Europe in what the West is convinced is revenge for sanctions, Deutsche Bank has become one of a growing list of institutions that believe the recession will be deep. Economists, for example, predict a decline in German GDP in 2023 by 2.2%.
Adds pessimism to business and the position of the European Central Bank (ECB), which recently announced that it would continue to fight record inflation by raising the discount rate. In September, we recall, Christine Lagarde raised the rate after more than a ten-year break to a very high 0.75% for Europe. The management of the ECB will be guided in making decisions by indications of inflation in the euro area. September statistics will be released next week and will hardly please European bankers and all other Europeans.
“The economic recession hanging over us will have a restraining effect on inflation,” Isabelle Schnabel, a member of the ECB Governing Council, quoted Bloomberg as saying. “Of course, we will definitely keep this in mind when determining monetary policy. However, given that the initial level of interest rates is now very low, it is clear that we will have to continue to increase it.”