The German Institute for Economic Research (IFO) has announced since days that the business atmosphere in the strongest economy and industry country in Europe, I mean Germany, witnessed a big retreat in July.
The German institute pointed out over a statement to the retreat of the monthly index that calculated of polling of nine thousand German companies, to 88.6 points in July after it hit 92.2 points in June.
That index implies various economic activities in the country.
The index recorded its lowest level since June 2020.
The index shows, undoubtedly, that German stands at the threshold of a hard slump as higher prices of energy and threats of shortages in gas supplies leave negative shadows on the German economy.
Opinions of the German companies revealed that the retreat was severe, especially, in the industry sector forecasts for the next months are pessimistic since April 2020.
Also, the weak global demand and tensions in the chains of supply leave hefty negative effects on the German.
The Russian threat of cutting the gas supply off Germany, due to Berlin’s support to Ukraine, arises fears of a dangerous shortage in energy supplies by the end of the standing year.
According to analysts, any other escalation in the energy crisis poses a main danger for the Germans as wintertime draws up.
Repercussions of cutting the Russian gas supplies don’t threaten Germany alone but also threaten more European countries which don’t know how to cope with up with challenges.
At the same time, the exchange rate of the European currency has fallen for a few days against the US dollar for the first time since 2002.
The unified European currency was affected by rousing fears of cutting off the Russian exports of gas completely to Europe.
European governments started to speak of the possibility of cutting off the Russian supplies of gas, so the European currency lost about 12% of its value since the beginning of the current year.
Regarding the weak growth in the Euro economic zone, the European Central Bank (ECB) could hardly increase the rate of interest to fight inflation, which was estimated at 5.8 in France and 7.6 in Germany last June according to recent figures published in Europe.
The analysts warn that the deteriorating Euro may lead to dangerous turnabouts that possibly depend on Russia’s desire to aggravate the economic war with Europe, especially that predicting Russian President Vladimir Putin isn’t an easy matter at all.
For example, after hours of singing an agreement by Russia and Ukraine with Turkey’s brokerage and under the auspice of the United Nations (UN), to open corridors across the Black Sea to Turkey’s ports to export Russian and Ukrainian wheat to the global markets, Russia shelled Ukraine’s seaport of Odessa with cruise missiles of the Kalibr model.
It is worth noting that Odessa is the main important Ukrainian port on the Black Sea, which gives it more important to resume exports of Ukraine’s grain.
It is worth to mention that Russia’s invasion of Ukraine led to a cute rise in prices of grain and food oils across the world, as Russia and Ukraine provide 30% of the world’s exports of wheat.
The Russian-Ukrainian crisis revealed major suffering for many countries that depend on the two warring countries to provide food supplies.
Devaluation of the European currency and the accelerating pace of inflation may encourage the European Central Bank to raise the interest rate urgently in July, in an unprecedented decision in eleven years.
William de Vigelder, an economist at the BNP Paribas Bank, made clear the European Central Bank shouldn’t respond to the rising prices of the primary commodities, but the European bank must work to resume control on inflation because rising prices of imports are linked to rising in the exchange rates.
France’s Central Bank indicated at the end of May that the weakness of the European currency may impede efforts of the ECB to control inflation.
Thus, as the European currency recorded its lowest levels against the US dollar will reflect on numerous levels, such as inflation, the purchasing power of households and companies, debts, and the ECB.
These repercussions may be an omen for poor months in Europe, the Mediterranean space, and Africa, especially, as no one knows either when the war in Europe stops or what occurs in the international system during a challenging period that is distinguished by apprehension, ambiguity, and uncertainty.
Translated by Ahmed Moamar
