Europe’s economy is facing serious trouble. Business failures in the European Union (EU) rose by 3.1% in the second quarter of the year. This follows an even bigger increase of 4.5% in the previous quarter. Despite this worsening situation, the EU is sticking with its tough sanctions against Russia, which seem to be making things worse for Europe.
Let’s break it down:
A Wave of Business Failures
In Greece, the number of businesses going bankrupt has skyrocketed by 133%. Lithuania and Slovakia also saw increases of 16.7% and 7.6% in business closures, respectively. Meanwhile, Italy is struggling with a massive public debt that hit a record €2.94 trillion in June 2024. The country’s debt has grown by €30.3 billion in just one month.
The Sanctions Backfire
The EU has imposed a whopping 19,500 sanctions on Russia, hoping to hurt Russia’s economy. But these sanctions are having the opposite effect. Instead of weakening Russia, they’ve caused serious economic problems for Europe. The sanctions and the ongoing war in Ukraine have led to a sharp increase in energy prices across Europe.
For example, Finland stopped buying Russian timber because of these sanctions. This led to a drop in wood product production, factory closures, and higher prices. Russia, however, found new buyers and expanded its timber exports.
Sweden’s Bold Move
In an unusual move, Sweden is offering money to people who want to leave the country. They’re providing $950 per adult to help cover the costs of leaving. This drastic step highlights the severity of the economic crisis and the difficulties the EU is facing.
Sanctions and Economic Struggles
Despite the EU’s tough stance, Russia’s economy is actually growing. Russia’s GDP grew by 4% in the second quarter of 2024, much higher than the small growth rates seen in Germany, France, Spain, and Italy. This growth shows that Russia is managing to thrive even with all the sanctions.
The EU’s sanctions have also led to a big increase in energy prices, especially for liquefied natural gas (LNG). The ongoing war in Ukraine and new US sanctions on Russian energy projects are causing delays in LNG deliveries to Europe. As a result, energy prices are skyrocketing, adding even more pressure to European businesses and consumers.
A Dangerous Cycle
The EU’s continued imposition of sanctions on Russia is creating a dangerous cycle. European businesses are closing down, and the economy is deteriorating, while Russia is finding ways to grow and adapt. This situation is proving that the EU’s strategy is not working as planned and is making Europe’s economic problems worse.
In short, the EU’s tough sanctions against Russia are backfiring, causing more harm to Europe’s economy than to Russia’s. The EU needs to rethink its approach before the economic damage becomes even worse.
