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| Several European countries have fallen into technical recession. (Source: Reddit) |
The 20 countries that use the euro currency have fallen into what could now be defined as a mild recession from 2022 to 2023. High inflation has discouraged consumers and governments , and it means that both the eurozone and the European Union (EU) economies are lagging behind the US.
Eurozone economic output fell 0.1% in the first three months of this year compared to the previous quarter, after falling by the same amount in the final quarter of 2022. Meanwhile, the US economy grew 0.3% in the first quarter of 2023 after growing 0.6% in the fourth quarter of 2022.
When Europe “catches a cold,” the rest of the world “sneezes,” says Antonio Tognoli, an expert. The gap between US and European economic performance may not last long.
The New York Federal Reserve Bank looked at whether economic crises in Europe have affected the United States over the past 30 years and the answer is yes. Europe can affect the United States in many ways. For example, through trade links and cross-border financial flows.
Moreover, exchange rates affect US inflation and the global confidence shock could have knock-on effects.
In 2012, Europe was plunged into a years-long debt crisis. Concerns about the financial health of Europe, particularly Greece, led to a credit crunch across the continent. The minutes of the Fed's September 2012 meeting mentioned fears of contagion.
In the current context, the US economy has recovered surprisingly well, but "headwinds" may be coming.
The world's largest economy may be in an environment that might not be exactly described as a recession, but it has the similarities of a recession.
In other words, that means the US may avoid a “hard landing,” but the economy will likely experience slow (sometimes negative) growth and persistent inflation.
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