When I publicly critized the European Recovery Fund (2020/2021), some labelled me as a ‘Russian troll’. The same thing happened, when I started to publicly criticize the corona lockdowns, which undermined our constitutional freedoms, around a year ago (this also led to personal defamation attacks).
Now, it seems that warning on the impending economic collapse of Europe and the possibility of Russia playing a strategic game in Ukraine, has lead to the same outcome… I guess that a weaker man could succumb under the pressure, but fortunately I am a rather stubborn bastard. ;)
Like I have mentioned few times, I’ve been writing our forthcoming forecasting report for over a month now, and it’s nearly completed. Our outlook is truly horrifying, and its mostly driven by politicis. The only way I can describe the recent actions of our politicians is: a deliberate act of vandalism against the European populace. Nationalization of Uniper is a sign of things to come.
I share some of our findings in this post, i.e., this is a sneak-peek of sort.
Insufficient electricity generation
Electricity generation capacity is seriously lacking consumption (or “load”) in Italy, Austria and Hungary. Italy, for example, is relying mostly on natural gas to fill the energy deficiency caused by the decision to shut down nuclear power plants in the 1990s. 15-20% of this gas comes from Russia, and the infrastructure to transport gas from, e.g., south to north is lacking. Alas, if Russia cuts off her gas supplies, lights will go off in the, north, which is also the industrial hub of Italy.
Europe, in total, has filled her energy deficiency by exports from Norway, Sweden and the U.K. Hydro-reservoirs fill levels in the Nordpool are around 70%, while the median fill level (2000-2019) for this time of the year is around 82%. Hydro-reservoirs are thus considerably lower than their average in the Nordics.
If Norway would see only little or mediocre rain during the fall, Europe will most likely experience rolling blackouts during the winter (without Russian gas flows). This, and the fact that fixing gas and electricity deficiencies is likely to take years, are likely to lead to an outright de-industrialization, that is, permanent shutting down of industries in Europe.
De-industrialization looms
Recently even The Economist has warned on the threat of de-industrialization of Europe (more precisely, Germany). And it’s no wonder. Producer prices in Germany rose by a mind-blowing 45.8%(!) in August. Inflation is getting totally out of control, and this means that an expedited rate hiking cycle from the #ECB , on which I (we) have been warning for a quite awhile, is looking more and more likely.
Recent comments by EB President Christine Lagarde of the ECB needing to go beyond the “neutral rate” of interest enforce this. In common tongue this means the ECB is willing to go beyond the rate that would be supportive to the economy.
Alas, the corporate sector of Europe is facing a ‘triple-'whammy’. High energy prices are forcing them to cut production and shut factories, fast inflation is eroding demand and expedited rate hikes increase debt payments, possibly considerably (and shunning demand). Can this lead to anything other than to de-industrialization?
September issues of our Q-Review, Stages of the Collapse, will be published next week.
At this time FI zone electricity price €19/MWh and FI zone net power -1004 MW, according to svk.se Kontrolrummet. The latter is instantaneous power but reflects hourly energy balance. Decades ago my college teacher pointed out in his lecture supply & demand in energy pricing. Does this pricing reflect anymore local supply? In national grids the main issue was high network stability. That way you had stable grid and pricing. According to the lecture "Så här uppstod elkrisen i Sverige" by prof. Blomgren (only in Swedish) the reliable supply and pricing issues cannot be repaired in years. It'll take decades of investments. According to Blomgren long haul transmission capacities cannot be fully utilized with present model of production. You can increase small scale production but you can transfer only limited amount of energy from multiple generators. My private Gedankenversuch, electricity runs our modern high speed digital trunks essential for any industry in Europe. Are we going to see Lebanon style rotating blackouts and occasionally diesel genset run businesses. However, without reliable communications lines. In late 60's and early 70's Lebanon was relatively advanced industrial and financial hub with working infrastructure. BR JKi