The European “way of life” has always been a vague concept, but — after Covid-19 — it chimed with a new generation looking for la dolce vita.
Citigroup Inc. is one unlikely poster child. At its new office in Malaga, Spain, junior bankers can expect to be paid half the salary of their London peers — $100,000, reportedly — in exchange for the chance to live continentally. More traditional working hours, the Mediterranean, a lower cost of living and longer life expectancy — the kind of soft power Europe wants to be known for.
That’s the dream, anyway. But the economic reality facing Europe as Russia steps up its war in Ukraine looks very different. A multiyear shock to living standards looms large across countries such as Spain, Italy, France and especially Germany, as real wages fall faster than for their counterparts in the US, where life will look sweeter. Europeans will have to contend with less energy, less output, less disposable income, more inflation and higher import costs. Social unrest is a real risk.
As Europe scrambles to unpick a German-led dependency on cheap Russian gas, hope is fading that the economic pain will be over by spring. Despite an admirable effort to fight Vladimir Putin’s gas shutoffs by building up reserves for the winter, most of that could be depleted by March. High energy prices and scarce supply will linger. Economists at Deutsche Bank AG and Barclays Plc respectively forecast a euro-area economic contraction of 2.2% and 1.1% next year.
Europe’s track record on containing inequality also faces a big test. Energy and food account for a much bigger share of spending for the bottom 20% than the top 20%. European governments have earmarked an estimated 500 billion euros ($496 billion) to cushion the impact of higher prices on consumers and businesses, according to think tank Bruegel, but that figure might just be the start. The UK, whose Brexit headaches hurt trade openness even before tanks rolled into Donetsk, will also have to spend big to protect its population.
Hence why some European firms now dream of an American quality of life. The US’s stable gas prices and government support for manufacturers have seen firms such as Volkswagen AG shift production there, while Tesla Inc. pauses German investment plans, according to the Wall Street Journal. Soaring energy costs have seen one in 10 German companies cut or interrupt production, according to one industry-association survey. This will ripple through trade partners’ supply chains inside and outside Europe, including in China — another place where the EU is reducing its dependency.
Sure, the US has seen inflation rise, but it also has the advantage of being a net energy exporter; two-thirds of its LNG exports through June went to Europe. The tumbling euro and pound show how Europe’s import bills are rising, from pricier energy to Apple Inc.’s price hikes. As French President Emmanuel Macron gravely tells his people that the age of “abundance” is over, Americans are spending more as gas prices fall. Those who make it to Paris have found luxury distinctly more affordable.
As apocalyptic as this sounds, the EU has endured recessions before. There’s still hope that governments will realize the best way of defending their citizens is through unity, by sharing energy and financial resources in a similar way to Covid.
But getting there will be tortuous. Governments around the world loaded up on debt during the pandemic, supported by loose monetary conditions that are now tightening fast. Even countries that avoided Germany’s energy errors — such as France with nuclear or Spain with renewables — are contending with their own issues of underinvestment and high debt piles. Rekindling solidarity will be hard.
There are worse places to be than Malaga in a crisis like this . But Europe’s soft-power advantage will likely be less about quality of life and more about building coalitions abroad and managing a wartime economy at home. Whatever the weather, Europe’s dolce vita is about to become a lot less sweet.
More From Bloomberg Opinion:
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Harsh Winter Reality Is Finally Sinking In for EU Leaders: Lionel Laurent
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Britain Goes the Wrong Way on Energy Bailout: Javier Blas
• A Decision Tree for Biden If Putin Goes Nuclear: Andreas Kluth
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg Opinion columnist covering digital currencies, the European Union and France. Previously, he was a reporter for Reuters and Forbes.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
