Europe's Prolonged Economic Struggles - What's Causing the Turmoil and How Canada is Impacted

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With inflation stubbornly high across Europe, consumers and businesses alike face significant economic hardship. Prices for essentials like food, energy and housing continue rising rapidly even as wages stagnate and economic growth slows. This toxic combination has led to protests, strikes, and a plunge in consumer confidence across the Eurozone.?

The Causes Behind Europe's Turmoil

Several key factors drove Europe into this economic mess:

• Russia's war in Ukraine - This disrupted vital energy supplies to Europe, causing natural gas and oil prices to skyrocket. Energy now makes up over half the Eurozone's inflation rate.
• Lingering supply chain chaos - The pandemic badly damaged global supply chains. Shipping costs remain well above pre-pandemic levels, pushing up prices.?
• The strong U.S. dollar - This has put further pressure on European exports, compounding economic struggles.
• Stubborn core inflation - Even excluding food and energy, Eurozone inflation sits around 5% - well above the 2% target. This suggests inflation has broadened into wages and services.?

Central banks have aggressively raised interest rates to rein in inflation, but this risks tipping fragile European economies into recession. The European Central Bank finds itself stuck between a rock and a hard place.

How Canada is Impacted

While Canada's inflation and economic data look better than Europe's, we do not exist in a vacuum. Our economies are closely intertwined, especially with the EU being Canada's second-largest trading partner. If Europe slips into recession or if the Euro currency declines substantially, it would undoubtedly impact Canada through weaker export demand and potentially increased inflationary pressures.

The Bottom Line

Navigating the tricky global economic landscape requires pragmatism and prudence from policymakers and businesses alike. While Canada has thus far avoided the worst economic turmoil, we must remain vigilant to external risks.?

If you're looking for an inflation-resistant asset to stabilize your portfolio, you may want to consider giving Gold another look.

For guidance on investing in gold bullion, coins and ETFs from a Canadian perspective, feel free to get in touch by phone at 604.613.1693 or email me at [email protected]. Or Book a call with New World Precious Metals to learn how Gold can help protect your wealth in these uncertain times.

The source article, linked here, provides full details: Europe Paralyzed by First Inflationary Shock

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