Mario Draghi, former ECB head, delivers a near certain recession outlook. A current ECB governor sees stagflation. However, an agonizing death of the Eurozone is the real story.
Draghi Says Euro-Zone Recession Almost Sure to Happen
Bloomberg reports Draghi Says Euro-Zone Recession Almost Sure to Happen
The euro zone is nearly certain to experience a recession by the end of 2023, former European Central Bank President Mario Draghi said, according to the Financial Times.
Speaking on Wednesday to a conference in Brussels organized by the newspaper, he said the slump probably won’t be “deep” or “destabilizing.”
“It is almost sure we are going to have a recession by the year-end,” the FT cited the ex-central banker and former prime minister of Italy as saying. “It is quite clear the first two quarters of next year will show that.”
Belgian Governor Pierre Wunsch, speaking earlier in Brussels, acknowledged the impact of tighter monetary policy and said that growth risks are “tilted to the downside.” The euro zone is “entering some weak form of stagflation,” he added.
Draghi Comments
- “Either Europe acts together and becomes a deeper union, a union capable of expressing a foreign policy and a defence policy, aside from all the economic policies . . . or I am afraid the European Union will not survive other than being a single market.”
- “The European economy has been losing competitiveness in the last 20-plus years, with respect not just to the United States but Japan, South Korea and, of course, China.”
- “In many, many technological areas, technological fields, we have lost presence, we have lost footprint.”
Draghi Presses for a Fiscal Union
Mario Draghi, is a former ECB head, former head of the Bank of Italy, and former technocrat (unelected) Italian Prime Minister.
I expect his recession comments will be repeated 100 times if not more by mainstream media. But his comments on a fiscal union is the real story here, not recession.
Draghi avoided the term fiscal union but he seeks a bailout of Southern Europe generally and Italy specifically. As ECB head, he pushed hard in monetary union direction and failed.
I have been commenting on this since 2004 or so.
The Euro is Fatally Flawed
The euro itself is fatally flawed because there is not a single interest rate that makes any sense for Germany, Greece, Italy, France, and Spain, let alone 19 countries.
It take a unanimous vote to change anything not specifically allowed by the Maastricht Treaty.
At the outset, France was allowed to force its agricultural policy on all the other nations to protect the family farm. Also at the outset, Germany demanded no fiscal union.
Every year, global trade policy fails due to France. And when Greece nearly blew up on Draghi’s watch, the EMU would neither let Greece sink nor bail it out.
Italy has needed bank reform and productivity reform for decades, but even while president Draghi made almost no progress on either front.
Single Market a Failure Too
The single market (EU) is a failure as well. There are 28 countries in the EU and to change anything important is nearly impossible.
It took decades to make a simple trade agreement with Canada, because a couple of tiny EU nations demanded changes that Canada would not accept.
Nannycrat Rules
The EU is governed collectively by a bunch of nannycrats who in the name of competitiveness, would break up every company before it even got started.
Google, Microsoft, Amazon, Facebook, and Nvidia could not exist in the EU because nannycrats would break them apart before they ever got big.
The US has the strongest, most free capital markets in the world. Chinese corporations get state support to aid exports.
In contrast, the EU has nannycrats who insist on fairness with no clear idea of what fair is.
Draghi laments ““In many, many technological areas, technological fields, we have lost presence, we have lost footprint.”
Indeed, and I just explained why.
Looking Backward, Not Ahead
Germany looks backward still attempting to protect its lead in diesel technology and analog phones. German infrastructure is pathetic due to lack of investment.
The EU is far behind the US and China on Artificial Intelligence (AI). The EU is guaranteed to drop further and further behind because instead of attempting to catch up, the EU seeks more regulation to stop everyone else.
Military and Foreign Policy
Draghi wants a” union capable of expressing a foreign policy and a defence policy, aside from all the economic policies.”
What a hoot. A single country can block any foreign policy action. Hungary and Poland both have done so, the former on Russia multiple times.
It’s as if Illinois could block whatever the President of the US wanted to do.
It is preposterous to moan about foreign policy and hint at an EU army when the EU cannot even get its act together on agricultural policy.
EU Won’t Fail, It Has Failed
Draghi laments “I am afraid the European Union will not survive other than being a single market.”
Already, the EU is nothing more than a “single market” led by dysfunctional nannycrats with endless regulatory madness and too little free market capitalism.
The EU fights over border policy, AI, G5, agriculture, trade, an EU army, and literally everything. One might say the same about the US, but it only takes a majority to change things in the US, not 50 of 50 (28 of 28 in the EU).
The EU won’t fail because it already has failed. But the cancerous death has been slow and agonizing. EU and EMU Rules make that impossible to change too.
Mish Flashbacks
- September 10, 2012: Why Bond Buying Undermines Democracy; Is Draghi Above The Law?
- April 11, 2013: Eurozone Math; One Size Fits Germany; Door Number Two
- February 28, 2014: Stiglitz: Leaving the Euro Painful but Staying in More Painful‘
- August 31, 2014: Eurozone Currency Dispute Intensifies: France Wants More ECB Action to Correct Overvalued Euro, Germany Doesn’t
- October 20, 2014: Eurozone Rotting to the Core; Four Possibilities; Beyond the Math
- January 13, 2015: Steen Jakobsen Warns “Euro is Not a Good Idea and ECB About to Make Biggest Mistake in History”
- March 10, 2015: From ZIRP to NIRP: Virtues of Germany vs. the Vices of Greece; What About “Speece” and Gold?
- September 3, 2015: Meet “Buzz” Draghi: To Infinity and Beyond
- December 6, 2017: An Italian Regulator’s Risk-Sharing Plan to “Cure the Eurozone”
- May 21, 2018: Italy’s New Prime Minister Puppet: Time to “Ringfence” Italy? MMT to the Rescue?
- August 24, 2018: Italy-EU Migration Feud EU Boils Over With Italian Threats: Schengen at Risk
- June 30, 2020: What Would It Take to Dethrone the Dollar?
- April 23, 2021: Who Benefitted from the Euro and Who Pays the Piper Now?
- July 12, 2021: Eurozone Debt Imbalances Aren’t Sustainable Yet They’re Unfixable Due to Germany’s Constitution”
- January 30, 2022: The Battle for Europe Integration Has Failed and Russia Provides Proof
- July 8, 2023: The Green Deal in the EU Goes Unfunded, Expect a Total Collapse
Spotlight on Four Possibilities Noted in October 2014
- Somewhere along the line, Greece, Italy, or France, is going to have enough of recession and stagnation and leave the euro in a disorderly eurozone breakup.
- Germany and the Northern European states need to bail out the rest of Europe.
- Germany can leave the eurozone in an orderly eurozone breakup.
- Decades of stagnation if the nannycrats succeed in keeping the eurozone intact.
Option two sounds nice but is fatally flawed. Germany would never agree to bailouts of that nature, and constitutionally couldn’t if it wanted to. Besides, Italy and France are too big. Regardless of how unpalatable, there are no other options.
And a decade later, we are in exactly the same place, but with increased tensions, more loss competitiveness, more border issues, and a euro that has plunged vs the dollar.
I repeat, the EU won’t fail because it already has failed. But the cancerous death has been slow and agonizing.
Cancer will eventually consume the patient. Unfortunately, the slow agonizing death may still be decades away.
Excellent points. I would only add the UN to your failure list, following in its League Of Nations pedigree. And what plays in Europe’s 28 won’t stay in Europe while migrating to those union of 50 states with a history of non-peaceful secessions and a successful rebellion thanks to French crown support.
Not decades – one at the most, but likely <5 years, as WWIII will once again drive capital from the continent.
I have always seen the EU more as a project of destroying what we had rather than bringing any improvement whatsoever: mainly destroying our sovereignty, we no longer have the right to decide what we want to do at our place. In addition to this, a continued refusal to define what Europe concretely is, what its roots are, and a desire to base this entire construction on abstract principles, hiding very poorly that the real objective is to integrate the entire planet.
So many saw the demise of the EU before it even became official, and even that has been warped further by whatever levers are still allowed to be pulled.
Never being a cohesive force, they apart fell on their collective faces, towards any long or short term energy requirements. Worse than that, they collectively refused to sit down and discuss solutions that would and could work for them all.
Egos for Money & Power was just too much, for too many to say “No” to, and the demise slowly began to occur. With rules that worked for some, but not all, were forced into play, the demise picked up steam. Then illegal, but semi-forced onto the EU, Members were basically made to accommodate people other than their own Citizens. With Covid, Inflation, Energy Woes, and shrinking tax revenue, to just name a few, the EU has started to crumble.
With nobody to look to for a Lifeline, the EU is probably toast. One way out now, if it would/could work, is to liquidate land. How much, and from each/which Country of course is the issue, and the reason nothing has been greatly discussed openly in public, or even speculated that I have heard or seen myself anyway, up to this point.
It will be a long road back at any rate, because this will obviously hurt all of Europe. With the looming recession, or some say current, the money will not flow freely into coffers to rebuild, restructure, and regroup. I am not seeing many paths that are brightly lit, but a lot of dim or even dark solutions could be in play and at hand soon, if something doesn’t change.
We shall see in the coming months, because Winter is coming, and with it lots of questions that still lay unanswered. They will have to be answered or chaos will begin to erupt, and some could/would say it already has started…
Without low cost energy from Russian gas (and legacy coal fired plants), Germany cannot afford its own welfare state, much less to prop up the loser Marxists in Brussels. The German manufacturing and export market was all that was keeping the EU out of the dust bin. …. AND ITS GONE…
NG from Qatar or Africa or Texas is going to have much higher transportation costs, and thus higher costs to German exporters. Russian gas was closer and pipelines were the cheapest transport method in the long term
Draghi messed up the ECB long ago, but one bad ECB president wouldn’t kill the EU by itsellf. Killing the golden goose that lays the EU’s prosperity was fatal.
If the EU wants to survive, they need to place a HUGE tax on Greta Thornberg, and a bigger tax on the WEF / Davos. Does anyone in Europe have the courage to do that??? Is it too late anyway?
Lets not kid ourselves, Europe shot itself in the private parts.
I agree, this is brought on by policyfailure after policyfailure.
Because the wrong people came into power.
However, there is so much death and suffering that slowly but surely, the majority is starting to realize this.
I guess that’s the 4th turning happening right in front of our eyes.
But I tell you, these are by far the worst years I’ve experienced in about half a century.
Because realizing that we’re being governed by absolute psychopats is truly a nightmare.
If you peruse the history section of your library, you will see the best and brightest do not go into politics. In any society, in any culture. There are some exceptions to the rule – leaders that get statues built in their honor, but most leaders build their own statues that get torn down later.
Sooner or later, the political class in every single empire was run by psychopaths. Every single one that made it into the history books.
Every empire follows the same script. Smart guys establish limited government with limited objectives. Corrupt self serving psychopaths continuously expand government until it destroys itself. They always start off doing it “for the people” and eventually do it “to the people”.
We should burn all the history books, since no one learns from them (sarcastic, not serious)
Read recently that Bloomberg is investing 500 million to get rid of the remaining U.S. coal fired plants. Et Tu Brute? California is looking into socialized electric rates, based on income. It is infectious.
Partially true @RonJ… he is actually spending $500 million “more” (above what he already spent) hiring lobbyists and consultants in Washington DC to ban coal plants.
No money will go to current coal miners to help change careers. No money will go toward WV communities that will be financially ruined by Bloomberg. No money will go toward laid off employees at coal fired plants.
No money will go to common Americans buried under their electricity bills.
In addition to paying the corrupt lobbyists in DC, Bloomberg will also spend money for fuel for his private jet to fly between his home on Bermuda, his home in NYC, and his lobbyists in DC.
Fossil fuel in Bloomberg’s private jet doesn’t count, because it benefits him.
“In contrast, the EU has nannycrats who insist on fairness with no clear idea of what fair is.”
EU will soon realize that life isn’t fair.
One could add the fiasco in Ukraine as the final nail in the coffin. The one thing Germany had going for it was cheap Russian gas. But these bozos went along with Brandon, and then Brandon blew the Nordstream… Poor saps.
You know what’s funny? US has put sanctions on Russian oil & gas, but the US still imports approx. 20% of its uranium needs from Russia. The US is the most hypocritical nation on the planet.
Didn’t Hillary sell our uranium to Russia?
Hillary would sell her grandmother for a donation to her “ charity”
The garbage zone is heading to religious wars. US & Putin cannot save u.
You brought it on yourself. UK cannot escape it too. The question is : when/ where
it will start.
Our EU clowns should show their middle finger to the US of A and make up with Putin , THAT is the ONLY way forward ! We really don t need fc kn, corrupt to the bone Whorekraine becoming yet another fc kn EU member, we don t ! …But what to expect from a EU circus and its worthless clowns ? Corrupt clowns on top of that !
Yep! You guys were played for saps. But it’s not the US of A, we have the same set of elites screwing us.
link to katehon.com
Agreed but will Putin want you back is the question
It will be decades. Job security. While the general population turns to dust. Provided a big war doesnt break out then who knows. Dust anyways.
With the sound of all the rhetoric regarding Iran a big war is looking very likely
I guess “anything is takes” is not enough.
It’s a burden always being right…
link to zerohedge.com
I am a loyal follower, Mish, but characterizing the EU’s attempt to reign in the large tech companies is a poor example of over regulation. Given the opportunity these monolithic beasts would destroy all competition. They have no regard for the consumer and trample smaller companies at will. Or, if they view you as a threat, they simply acquire you. They are dangerous in so many ways. Not to mention what they may be willing to subject our society to in the name of AI progress.
I noticed one significant omission in this champagne politician speech as well as the article. The failed migration policies of Western Europe. The East will fight to give up its veto because without it, the West would flood it with unwanted migrants. In addition to all the mentioned failures, in a generation the the Western part will look like Middle East without oil.
Encouragingly, the Eastern part has recognized that the centre of gravity is moving to East Asia.
Mass-immigration has completely transformed societies within the EU.
Violence, deteriorating social cohesion, astonishing levels of inequality, housingcrises, censorship and unsustainable levels of debt.
The authorities are arresting citizens when they express criticism of these policies online. Rather than directing resources to solve actual crimes, they’re monitoring social media for anyone having a contrarian opinion.
This is what you get when you elect authoritarian psychopats to govern you.
It didn’t help the EU when the U.S. decided to push for Ukraine to join NATO and the whole Nuland-hatched scheme backfired. The coup de grace was when the U.S. blew up the Nordstream pipeline – sabotaging Germany and Russia at the same time.
Exactly.
This is an unprecedented level of corruption, even for the European elites.
They decided to become the lapdog of an empire in decline.
And I’m not saying this with glee, but not just the EU is in decline.
A shifting in global powers has been set in motion because the rest of the world got sick and tired of US dominance. There was a time where the USA was the stabilizing power in the world, but that time has passed.
Every institution is captured and it feels like the foundations of our society are crumbling.
Debt, war, chaos and a decline in livingstandards seem to be our future.
I’ve never been more pessimistic.
Excuse you @dtj, but the US did not blow up Nordstream. There is substantial evidence that some combination of Biden / Blinken / Nuland / Sullivan (collectively Obama puppets) may have blown up the pipeline…. probably blew up the pipeline.
I defy you to name someone outside of Washington DC that was even asked for their opinion, never mind voted one way or the other.
Europe has a similar problem. The EU has zero democratic legitimacy. No one in Europe elects the idiots in Brussels.
All these so-called “democracies” that have zero representation of the populace they claim to speak for.
Biden is not our president, and it has nothing to do with election counts. It has everything to do with Washington DC not giving a fig about the rest of America.
Time to do something about it ehh ?
As a disillusioned EU citizen, I wholeheartedly welcome the total collapse of this corrupt political vanity-project. The sooner, the better.
Nobody voted for this and nobody wants unelected bureaucrats gaining increasingly more power.
This is a failure, no amount of BS wars, no amount of media propaganda and no amount of moneyprinting can revive this failed project.
Are you crazy? I agree with your opinion, but I do not welcome collapse.
I’m not Harry so I can’t speak for him, but I read his comment as he want’s the collapse of the Eurozone mess, not the collapse of society itself.
Exactly.
I’ve voted against these European overlords.
It’s a monstrous creation and it’s a powergrab, nothing more.
Before the EU we had decades of peace and prosperity.
Peace is gone and prosperity as well.
Housing is an absolute nightmare, there’s a shortage of millions of homes and nothing is affordable.
Greed because of central planning is now the default mindset of people. It’s truly horrific to witness the sheer greed that motives people.
So yeah, I welcome the end of this political project as it does NOT represent the will of the people. It’s the European elites that control politics, finance, the media and the educational system that benefit from it, not the average citizen.
I love Europe. I’ve seen the decline of the last 25 years and it coincided with the EU coming into existence.
Powerhungry, selfserving politicians eager to create a political superstate is NOT what the average citizen has asked for.
What I’m hoping for is sovereign countries working together while serving and protecting their citizens.
This monstrosity with all its flaws and failures is destined to fail and that’s what I want to see collapse.
All these beautiful cultures will work together like they did in the past, but not at the behest of unelected authoritarians seeking total control and power.
And with all the negativity Polish voters just elected a pro EU candidate, Donald Tusk go figure