Economy

The European economy has come into resistance

The European economy has come into resistance
Written by on100dayloans

Provisions, strategic reserves, stocks… Faced with uncertainty and war on their doorstep, European states as well as businesses and individuals are rediscovering an interest in hoarding raw materials, foodstuffs and strategic components in all kinds in case of difficult days. With the pandemic which continues to paralyze certain regions of the world and the war in Ukraine, the functioning of the globalized economy continues to be jammed. Against the backdrop of the issue of economic sovereignty.

We’ve known since the onset of covid and the ensuing shortage of masks, our supply chains are stretched and tangled, even for basic goods. The limits of “just in time” have become obvious. With this method of organizing production, storage is not an investment but a cost. However, the less stock there is, the more there is dependence on suppliers and vulnerability to crises. As illustrated by Fabrice Zumbrunnen, the managing director of the Migros group in The weather on March 28: “Before the pandemic, we only stored packaging materials for a few days. Today, we have built up reserves for several months. The war [en Ukraine, ndlr] only reinforces this trend.”

Reinforcing its resistance to shocks again becomes an imponderable. Even though they had already been holding back European industrial activity for months due to the pandemic, the logistical bottlenecks are reinforced by the conflict in Ukraine. While there is already a shortage of semiconductors – mainly from Asia – the European automotive sector, for example, is hit hard by supply difficulties for certain spare parts manufactured in Ukraine, leading to the temporary shutdown of Volkswagen, BMW and Renault factories. The current confinement of Chinese cities, including Shanghai, also promises to postpone a return to normal even further.

Energy, main concern

The energy front is even more uncertain. Gas and oil have come to our fond memories as essential raw materials in our developed economies. Europeans, like the Swiss, are faced with their dependence on natural gas from Russia, a supplier that is difficult to do without in the short term. In normal times, the supply is done continuously via gas pipeline without substantial stocks. For now, don’t worry, the contracts are respected on both sides. But the days of trade with Russia are numbered.

And when trade seizes up, the first instinct is to secure your supply at all costs. Pending the expansion of liquefied natural gas import capacity by ship, Qatar is at the center of attention to replace the former Russian partner. However, the Gulf State also has customers to supply in Asia and will not be able to respond positively to all requests. Especially if the European states, Germany in the lead, try to negotiate bilaterally, like a remake of the early days of covid for the supply of masks.

Insufficient gas stocks

Gas stocks exist in some countries but they will not be enough. To strengthen the European Union’s resistance, the Commission also wants to oblige each Member State to fill its gas reserves to “at least 80%” of their capacity by November 1, 2022, then to 90% before each winter. the following years. That is. But as the Lecho.be site reminds us, in France and Germany the maximum storage capacity corresponds to approximately 25% of annual consumption.

And in Switzerland? Faced with the vulnerability of the country’s supply systems, the Federal Council decided last Wednesday to strengthen the Federal Office for National Economic Supply (OFAE). The latter, currently comprising 32 positions, will be increased by 12 positions. As for the position of OFAE delegate, it will go from… 40 to 100% occupancy rate.

While war is at the gates of the European Union, it is time for the resistance of the economies. Faced with multiple external dependencies, the reconstitution of strategic stocks is essential but will not be enough. However, the redirection of already weakened economic flows promises to be a task as daunting as the implementation of the energy transition.

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