The Ukrainian war within the unforeseen European decline


The economic growth in Europe is, according the current forecasts, blocked as the consequence of the Ukrainian war. For Italy it is not an effective novelty, but the perspective is worsened also in relation to a not brilliant past. According to OECD statistics, Italy is, the only European country that in the last thirty years has suffered a reduction in wages of 2.9 per cent, while all the others have registered a more or less satisfactory growth *

There had been  in Europe a new phase of growth in the last years of decade. But 2020-2021, with the pandemic crisis, economy was again in difficulties. The resumption of growth and the increase of the employment were foreseen for 2022. Unfortunately, the war in Ukraine cancelled this forecast. The reverse happened.

1.    in Germany, for the first time in the past decade, growth was is strongly declining. The economy is stagnant and close to recession. The traditional high trade surplus had declined and the growth is close to zero. The policy of the new tripartite government lead by Scholz was in trouble as soon as he took office. 
The case of France is indicative of the new European difficulties. In the June elections, Emmanuel Macron was re-elected to the presidency of the Republic, but the new government has not the majority in the Assembly. The Resemblant National (National Rally) led by Marianne Le Pen won 89 seats in the National Assembly, an unprecedented result in the French parliamentary history well above any forecast.
In this new context he broad left-wing alliance, NUPES, united behind Jean-Luc Melenchon head of the extreme-left The France unsoumise, became with 131 seats i became the second largest party and the most prominent opposition group in the Assembly,  
At the same time, The Republicans the old party of the traditional right lost half of the previous seats with only 61 representatives in the National Assembly.
As a consequence of this unexpected election result, Macron’s Ensemble , the electoral coalition of eight parties,   lost control of the National Assembly having obtained 245 eats well short of the 289 needed for a majority in the 577-member chamber.

It was an unforeseen scenario. For the first time the new government had the main opposition linked to two away from the traditional political asset of the fifty Republic. And the minority government had to try for a possible majority to implement its policy.

Even tough without the majority in the Parliament, the president of the Republic remained responsible for foreign policy and defence, according to the constitutional provision. An important aspect of the new French foreign policy for the president without a stable political majority.

The novelty was even more profound in Italy, where the early elections at the end of September were the consequence of the crisis of the government led by Maio Draghi, former president of the European Central Bank.
According to forecasts, the new right-wing government will be led for the first time by Giorgia Meloni leader of Fratelli Italia, a far-right party, together with the League led by Matteo Salvini and Forza Italia led by Berlusconi who had led his first right-wing government in early 1994. 
In other words, the war in Ukraine has deeply destabilized the policy of the main eurozone countries. 
2.   The new condition has two intertwined causes. For Europe, the reasons behind the difficulties are the sharp rise in the price of gas due to the reduction in Russian supplies. It should be remembered that last autumn Angela Merkel and Putin agreed on the installation of the second gas pipeline which allowed 100 billion cubic meters of gas, sufficient for German needs and also to supply some neighboring countries such as the Netherlands and Italy. 
The blockade of the second pipeline which had to be made operational in October last year and the gradual reduction of gases brought through the first pipeline had serious consequences not only for families but for much of German industry. causing a sharp decrease in production which reduced the export of manufactured goods, the source of the high level of production and the foreign surplus in the trade balance which had the highest surplus worldwide. 
The isolation of Russia did not occur. The shortage of gas and the difficulties in the supply of alternative energy sources are having serious consequences for families, industrial production and the services in western Europe.
 Russia's isolation was to block its export (except gas), heavily devalue the ruble and put Putin's government in crisis. The opposite happened. The export of Russian gas has found new outlets in China through the pipeline inaugurated in 2019 while the new one that will pass through Manchuria will double the supply of gas to China, bringing it to over 100 billion cubic meters.
 A new agreement with India has provided for the quadrupling of liquefied gas supplied by Russia. Overall, Russian gas has found outlets in two countries which comprise 40 percent of the world's population.
 It is to be added that also Turkey, violating the rules imposed on countries belonging to NATO, has established new agreements for the supply of Russian gas.
 3.  This conversion of outlets has placed European countries in difficulty and, in the first place, Germany and Italy, the main users of Russian gas in Europe. Alternative sources from the Middle East, Algeria, potentially Congo are not immediately available, creating growing problems for household heating and for the energy supply of industry and services.
Unsurprisingly, inflation for the first time since the euro was established has reached levels around 8 percent, drastically reducing household purchasing power and production levels.
The recovery of the economy already underway and which should have taken a definitive leap forward has given way to a new phase of stagnation, a reduction in income from work, an increase in poverty. 
Is it a painting destined to last over time? Any prediction is risky. The war in Ukraine can go on for a long time. Russia will not accept Ukraine, the largest European country, joining NATO. It is not Finland that has declared itself in favor of his entry. It is the largest country on the continent with 45 million inhabitants directly bordering the Russian Federation. The difference with two small countries like Estonia and Latvia with less than a tenth of the inhabitants of Ukraine is evident. And, in the case, it belongs to an era characterized by the difficulties of Russia.
In any case, Russia has substantial control of the Donbass region. The fundamental port of… cannot operate, as has been the case for gas, without an international agreement with the participation of Russia.
Macron's France needs to resume the initiative that remains in the hands of Macron at the international level, who heads a minority government. Germany has overturned the policy followed by Angela Merkel, but it cannot renounce the partnership with Germany. Italy will be led by a composite right-wing government in which the League will work to recover the space for a compromise.
The future looks uncertain and any forecast can be risky. But the fact remains that the war has created a new political horizon, strengthening relations between Russia and China and concentrating the difficulties connected with it on Europe.
Over the past twenty years the United States had to leave Iraq and withdraw from Afghanistan ions of the major European countries appears important, but also difficult to predict. The only certainty is that the framework and international relations have profoundly changed and Europe can still take the initiative or risk being definitively on the edge of the new center of poetics located on the shores of the Pacific where the United States overlook on one side. and China, an ally of Russia of the other.

*Tito Boeri and Roberto Perotti – Repubblica,29 agosto 2022, p.7.

Antonio Lettieri

Editor of Insight and President of CISS - Center for International Social Studies (Roma). He was National Secretary of CGIL; Member of ILO Governing Body and Advisor for European policy of Labour Minister. (