by Tyler Durden
January 05, 2015
Slowly but surely Europe is figuring out
that as a result of the western economic and financial blockade of
Russian, it is Europe itself that is suffering the most. And while
Germany was first to acknowledge this late in 2014 when its economy
swooned and is now on the verge of a recession, now others are
Case in point:
the former head of the European
Commission, and Italyís former Prime Minister, Romano Prodi who
told Messaggero newspaper that the, "weaker Russian economy is
extremely unprofitable for Italy."
Romano Prodi's statement:
Lowered prices in the international
energy markets have positive aspects for the Italian consumers,
who pay less for the fuel, but the effect will be only
In the long-term however the weaker
economic situation in countries producing energy resources,
caused by lower oil and gas prices, mostly in Russia, is
extremely unprofitable for Italy, he said.
lowering of the oil and gas prices in combination with the
sanctions, pushed by the Ukrainian crisis, will drop the
Russian GPD by five percent per annum, and thus it will
cause cutting of the Italian export by about 50%,"
"Setting aside the uselessness
or imminence of the sanctions, one should highlight a clear
skew: regardless of the rouble rate against dollar, which is
lower by almost a half, the American export to Russia is
growing, while the export from Europe is shrinking."
In other words, just as slowly, the
world is starting to grasp the bottom line: it is not the financial
exposure to Russia, or the threat of financial contagion should
Russia suffer a major recession or worse:
it is something far simpler that
will lead to the biggest harm for Europe's countries.
The lack of trade.
Because while central banks can monetize
everything, leading to an unprecedented asset bubble which if only
for the time being boosts investor and consumer confidence, they
can't print trade - that all important driver of growth in a
globalized world long before central banks were set to monetize over
$1 trillion in bonds each and every year to mask the fact that the
world is deep in a global depression.
Which is why we read the following
report written in yesterday's
Deutsche Wirtschafts Nachrichten with great interest because it
goes right to the bottom line.
In it Russia has a not so modest
proposal to Europe: dump trade with the U.S., whose call for Russian
"costs" has cost you another year of declining economic growth, and
instead join the Eurasian Economic Union!
From the source:
Russia has presented a
startling proposal to overcome
the tensions with the EU: The EU should renounce the
free trade agreement with the United States
and enter into a partnership with the newly established
Eurasian Economic Union instead (EAEU).
A free trade zone with the neighbors would make
more sense than a deal with the U.S..
It surely would, but then how will
Europe feign outrage when the NSA is found to have spied yet again
on its "closest trading partners?"
Some more on Russia's proposal from
Vladimir Chizhov told
"Our idea is to start official
contacts between the EU and the EAEU as soon as possible.
[German] chancellor Angela Merkel talked about this not long
ago. The EU sanctions [on Russia] are not a hindrance".
"I think that common sense
advises us to explore the possibility of establishing a
common economic space in the Eurasian region, including the
focus countries of the Eastern Partnership [an EU policy on
closer ties with Armenia, Azerbaijan, Belarus, Georgia,
Moldova, and Ukraine]".
"We might think of a free trade
zone encompassing all of the interested parties in Eurasia".
He described the new Russia-led bloc
as a better partner for the EU than the U.S., with a dig at health
standards in the U.S. food industry.
"Do you believe it is wise to
spend so much political energy on a free trade zone with the
USA while you have more natural partners at your side,
closer to home? We donít even chlorinate our chickens", the
The treaty establishing the Eurasian
Union entered into life on Thursday (1 January).
Modeled on the EU, it has,
Moscow-based executive body
the Eurasian Economic Commission
a political body, the Supreme Eurasian Economic Council,
where member statesí leaders take decisions by unanimity
It has free movement of workers and
a single market for construction, retail, and tourism.
Over the next 10 years, it aims to
a court in Minsk
a financial regulator in Astana and
possibly, to open Eurasian Economic Commission offices in
Astana, Bishkek, Minsk, and Yerevan
It also aims to launch free movement
of capital, goods, and services, and to extend its single market
to 40 other sectors, with pharmaceuticals next in line in 2016.
And as a
The Eurasian Economic Union, a trade
bloc of former Soviet states, expanded to four nations Friday
when Armenia formally joined, a day after the union between
Russia, Belarus and Kazakhstan began.
So the ball is in your court, Europe:
will it be a triple-dip (and soon
thereafter quadruple: see Japan) recession as your
Goldman-controlled central bank plunders ever more of what
little is left of middle-class wealth with promises that this year -
for real - is when it all
or will Europe acknowledge it has had enough and
shifts its strategic, and trade, focus from west (speaking of
the TTIP, Germany's agriculture minister just said "We
can't protect every sausage" referring to the TTIP) to east?
Considering just whose interests are
represented by the unelected bureaucrats in Brussels, we won't be
holding our breath.