Text/Cheng Jing
Editing/Lacquer
Europe has just experienced a scorching summer, followed by an even more bitter winter. In addition to the Russo-Ukrainian war, extreme heat, raging wildfires and historic droughts, "heating" inflation is plaguing people on the continent.
Zhang Xiaoyun, a Chinese girl who started her business in London, now has to pay an additional 15% to the accountants and lawyers she works with, only because the other party has made it clear that they will raise prices because of serious inflation. Li Ji, a Chinese who also runs a bookstore in London, most of his customers happen to be young people who have lost their extra purchasing power due to inflation. To save money, he ditched the warehouse where the books were stored and piled thousands of books in his home.
Today, the cost of living is more stressful than operating: from £1.50 (£1 is about 8 yuan) to almost £3 potato chips, from £3 to £7 butter, and at least 50% up in electricity and gas bills...
Food prices in British supermarkets Photo: So it goes
The same thing has happened in other European countries: high inflation has swept across Europe this year, with the eurozone reaching a record high of 8.9 percent annually in July. High inflation, emanating from the pandemic, the Russo-Ukrainian war and energy problems, will exacerbate the risk of recession in Europe, but no one knows how long it will last.
In response to inflation, some people are no longer buying new clothes, some people are taking fewer baths, and governments are working intensively to develop rescue and regulation measures. But observers point out that with external conditions difficult to change immediately, european heads of state have only one option left: to help consumers by all means.
Chinese entrepreneurs in the UK do not dare to rent shops for a long time
In Zhang Xiaoyun's eyes, Old Bond Street in the heart of London is an "arrogant" street – flanked by a series of luxury goods and top designer brand stores. In the past, brand collection stores with a short establishment time were not eligible to settle in.
A designer jewellery store on Bond Street, London, England.
But now it's different. Late last year, she rented a short-term storefront behind Old Bond Street and did a seven-week "pop-up" marketing session next to two internationally renowned jewelry brands. In order to get this opportunity, Zhang Xiaoyun submitted various background information and presentation plans to the intermediary, and also made a PPT display. But she feels that this is because in the context of the slowdown in the British economic growth, some shops in the old commercial streets have been vacant for a long time, and they have been put down after being "oppressed by reality".
This year, Zhang Xiaoyun once again received an olive branch from another old commercial street in London, it is said that there are many vacant shops for her to choose from, but she does not dare to rent the shop for a long time, "Now the British economy is not good, everyone's willingness to spend is relatively low, and many entrepreneurial friends around them do not dare to start."
The souks in Walhamstow, East London.
In its latest World Economic Outlook report, the International Monetary Fund (IMF) predicts that the UK's economic growth rate will slow significantly in the second half of this year and become the weakest economy in the Group of Seven (G7) next year, with growth forecasts of 3.2% and 0.5% respectively this year and next year.
Data from market research firm Gfk also shows that the UK Consumer Confidence Index (CCI) fell to its lowest level in nearly 50 years in August due to heightened recession fears and high inflation.
Li Ji, who also runs an online bookstore in London, has also been under pressure in recent months. His bookstore specializes in game books, comics, religious studies, literature niche books, and after opening at the beginning of last year, the bookstore business is quite good because the United Kingdom is still implementing epidemic control. He said that because online bookstores do not need to go out to buy, coupled with people's free time during the epidemic lockdown, they can enjoy entertainment activities that they do not have time to take care of on weekdays.
In February 2021, the UK was in the process of implementing a third lockdown, and all clothing stores on Bond Street were closed.
However, in February this year, when the United Kingdom announced the complete lifting of the new crown epidemic prevention restrictions, the turnover of bookstores began to "fall off a cliff", almost to the waist. According to his observation, many Britons have experienced the epidemic lockdown for nearly two years, and have begun to have fun and shop, and online consumption has decreased accordingly.
When sales improved slightly, inflation intensified. According to Li Xuan, his main customers are not rich people, most of them are students, and the price increase in recent months has a great impact on the purchasing power of these people, "The money in their hands may be just enough to live, and if there is surplus money, they can use it for entertainment." But now it's difficult."
To make it easier for bookstores to appear in search engines, Li began to adjust the bookstore category — the vertical category bookstore originally aimed at game and comic book lovers, and now adding second-hand books and some bestsellers.
Mr. Lee also returned the warehouse where the books were originally stored and piled thousands of books at home, saving £400 a month in rent. Fortunately, he laughs, the house he rents now is still quite large, sharing a room with thousands of books, and "walking sideways."
One-third of UK households face 'energy poverty'
Zhang Xiaoyun admitted that compared with the pressure of the company's operation, the inflation of daily necessities made her more stressed. "The price of almost every food in the supermarket is rising, and the increase in daily expenses is noticeable." She said her favorite potato chips had risen from £1.50 to nearly £3; what would have been enough for £20 to eat for two or three days was "now nothing more than enough to spend the same money".
Li Xuan also intuitively felt the soaring cost of living. He told Phoenix Weekly that since March, a box of six instant coffees has risen by a quarter; A piece of butter rose from £3 to £7.
Behind the rising cost of living is soaring energy prices. Britain's Office for National Statistics said at the end of August that in the year to August this year, british natural gas prices rose by nearly 96% and electricity prices rose by 54%.
In April 2022, crowds protested against the Conservative government outside the Prime Minister's Office, accusing the latter of failing to deal with high inflation.
Zhang Xiaoyun uses "heartache" to describe the mood when he sees the energy bill. Her pop-up shop, which opened around Christmas last year, had expected electricity to be around £2,000 for seven weeks, but the first adjustment in electricity prices coincided at the beginning of the year, and by the end of february, she had received electricity bills of more than £5,000. Her household electrical bills have also risen from less than £100 to £150.
Li Jian introduced to Phoenix Weekly that the price of British energy companies is divided into two types: monthly packages and flexible charges, he chose a fixed-price monthly package, the price rose from 140 pounds to 160 pounds, the increase is acceptable; But one of his friends is "flexibly paying" at real-time monthly prices – based on recently received price increase notices, a friend is estimated to be paying a total of £500 for electricity and gas next month.
To make matters worse, gas companies have issued notices that prices may be raised again in October this year and early next year. Therefore, there are only two choices in front of Li's friends: do you continue to "flexibly pay" and pay an unpredictable but possibly increasingly expensive bill every month, or sign a monthly package at today's high price?
In the autumn, the British's energy bill will rise even further. The UK's Energy Regulatory Authority (Ofgem) announced on August 26 that the home energy cap price will be raised to £3549 in October, an increase of up to 80%. Since most of the British gas demand is consumed during the cold season from October to March, and Ofgem will adjust its energy price every three months from next year (now every six months), the cap price may be further increased.
In August 2022, the UK announced an 80% increase in the cap on its energy bill, with low- and middle-income earners becoming the most hurt by rising energy prices.
The UK's charity Action National Energy expects that by October this year, UK households facing "energy poverty" will account for a third of the country's households, or as many as 8.9 million households. By the organization's standards, a household is "energy poor" if its energy expenditure accounts for more than one-tenth of its income. The latest forecasts from energy consultancy Cornwall Insight show that by April next year, the annual energy bill of UK households will exceed £5,300.
As a result, this summer, many people launched the "Don't Pay for Britons" campaign, which aims to get millions of Britons to join the boycott of price increases and stop paying energy companies from October 1.
Jack Cable, an activist for the "Don't Pay the Britons" campaign, told Spain's Revolt newspaper: "In just a few weeks, we managed to get some 100,000 people across the country to commit to no longer paying fees from October 1 because we can't continue to tolerate a sharp increase in the costs of energy companies." These fees have been rising over the past 12 years, especially in the last two years. ”
The increase in energy prices has also increased the logistics costs of Li Xuan Bookstore a lot. He calculated that even the domestic freight rate, which did not rise much, rose from £7 to £9. And these costs are paid by his customers who do not have enough money.
In life, Li Ji tried to cook at home as much as possible, and no longer added new clothes. According to a recent survey published by the British newspaper The Sun, about 10% of British respondents cancelled their summer travel plans due to high oil prices, and about 7% of respondents cancelled their family visit plans due to the increase in the cost of living.
A study by the Royal Financial Fair trust showed that one-third of UK households reduced the use of cookware and ovens, one-third had reduced the number of showers and one in two had turned down the temperature of their heating.
Even Britain's favorite pubs are at risk of closing. Six of britain's largest pubs and winemaking companies say some pubs will have to pay more than three times their bills this year, which will lead to a broader cost-of-living crisis.
Green King Group chief executive Nick MacKenzie, which owns 2,700 pubs, said one of the group's pub tenants had added £33,000 to their energy bill this year. "If the government doesn't step in to support the industry right away, we could face the prospect of pubs not being able to pay their bills, losing jobs, or even being forced to close their doors, which means that all efforts to keep pubs open during the pandemic could be in vain."
The British government relieved public grievances by "robbing the rich and helping the poor"
The UK Consumer Price Index (CPI) rose 10.1% year-on-year in July, the highest since 1982, according to the Office for National Statistics. The Bank of England expects the CPI to rise to 13% by October. Citibank has issued forecasts that CPI gains in the UK will peak at 18.6% by January next year.
The last time britain experienced such severe inflation was more than 40 years ago. The sharp rise in crude oil prices in the 1970s once caused great inflation around the world. In 1976, the then Labour government borrowed $3.9 billion (equivalent to $18.6 billion today) from the International Monetary Fund to stabilize the pound sterling exchange rate.
Li Guanjie, a think tank researcher at the Uk Research Center of the Shanghai Institute of Global Governance and Regional Country Studies at Shanghai University of Foreign Chinese, pointed out to Phoenix Weekly that there is currently serious inflation in the UK, mainly because the epidemic in the past two years or so has interrupted the pace of British economic development. Sunak, the former chancellor of the exchequer, who is competing for the British prime minister, has issued a series of bailout policies during the epidemic, in which more than 100 billion pounds of cash have been paid directly to the people, and "these over-issued currencies still need time to digest".
On the other hand, he analyzed that because the BRITISH energy price is in line with the international market, the government does not directly regulate the price, so the fluctuation of oil and gas prices will be directly reflected in the public's bill. The increase in demand for energy in social production after the end of the epidemic in many countries, coupled with Russia's cuts in natural gas exports to Europe this year, has made international energy prices go all the way up.
Li Guanjie pointed out that as an energy exporter, the British economy will benefit from the rise in international oil prices, while ordinary people have been greatly affected, "but the British government's approach to solving the problem is different from other countries: once the energy price rises, the government will tax through other means and then subsidize the people."
According to the British "Guardian" report, from October, the British government will issue a 400 pound energy subsidy to each family, and low-income households, retirees and other groups will receive a subsidy of 650 pounds.
Earlier, in July, the British Parliament passed a tax bill to collect a 25% "windfall tax" on oil and gas companies in the North Sea oil fields to subsidize the rising cost of living, ending in 2025. With this tax bill, the UK government expects to raise £5 billion a year.
In Li Guanjie's view, this can be called a move of "robbing the rich and helping the poor". Since the summer, people in Britain's rail, aviation, London Underground, docks and other industries have held a number of strikes to demand pay raises in response to record-breaking inflation. The discontent is simmering across industries, with school, hospital and court personnel threatening to join the strikes that will not keep up with the rise in inflation.
On 21 June 2022, London Waterloo Underground station was closed due to strikes. The strike was sparked by rising inflation in britain.
"Whether it is the collection of taxes on oil and gas companies, the gradual reduction of energy bills, or the reduction of energy value-added tax and green energy taxes proposed by the two prime ministerial candidates, the Conservative Party is pacifying people's hearts and relieving public grievances." Li Guanjie said.
When the new government comes to power, can "rich politicians" take care of the people's livelihood?
Britain's Chancellor of the Exchequer Nadhim Zahawi said that under the 80% increase in energy bills, not only low-income people, but also the middle class with an annual income of 45,000 pounds need help from the government to pay the energy bill, and teachers and nurses are among the same groups.
British society generally believes that the government needs to come up with more and more powerful interventions. "This is an economic war, a task hanging over the head of the new prime minister." Howell, a former conservative party secretary for energy, said: "The new government that came to power in September would have to come up with £20 billion or even £30 billion in aid to support up to 15 million families in need." ”
By the end of August, Terrass and Sunak, who were vying for the prime ministerial position, had been debating for nearly two months about how to mitigate high inflation.
Britain's Conservative Party's leading candidates, Sunak (left) and Terrass.
Mr. Tras, who is currently leading in support, has stressed that he will cut taxes from his first day in office, totalling £30 billion. She advocates a moratorium on the increase in national insurance and corporate taxes, as well as a moratorium on green energy taxes, which are mainly used to support the UK's clean energy transition.
Mr. Terrass said the undercharged portion of the tax would be met by extending the repayment of debt owed to the UK during the pandemic. She also plans to create "low tax, few rules" innovation zones across the UK with the intention of spurring economic growth.
Jill Kirby, head of the Policy Research Centre, a British think tank, commented that Terrass's approach attracts and retains overseas investment, and that the low tax policy of thatCher's era has had a corresponding effect.
Sunak, a former chancellor of the exchequer, has been adamantly opposed to cutting taxes during inflation, arguing that it would exacerbate inflation and push up interest rates. He advocated controlling government public spending first, and then cutting taxes sharply after inflation was resolved, including lower commercial taxes and personal income taxes.
But as the situation changed, Sunak announced at the end of July that if elected, he would stop collecting energy VAT for a year when the energy ceiling exceeded £3,000. Once the policy is in place, it will save an average of £160 per household.
In addition, Sunak also offered to return the housing tax for residents and reduce the electricity bill. In terms of long-term policies, he also proposed to reduce Britain's dependence on French ports and increase cooperation with the Netherlands and Denmark to alleviate supply chain tensions.
For the promises made by the two candidates, the public may not pay the bills. Li Said he and those around him shouted that "there is no hope", after all, the Conservative Party mainly represents the interests of the british middle and upper classes, and the income of some poor people cannot even reach the individual tax threshold, no matter how the policy changes will not help.
Li Guanjie believes that the two factors leading to the current inflation of the epidemic and the war will not last long, "the British epidemic restrictions have been completely relaxed, the government will no longer 'release water', once the domestic economy returns to the law of free market operation, it will slowly return to normal." ”
Although it is difficult to predict how long the Russo-Ukrainian war will last, Li Guanjie judged that the oil price fluctuations caused by the conflict have reached their peak and are bound to go down in the future, "If Europe can rebuild the global energy supply chain and cut Russian natural gas imports by two-thirds by the end of this year, Europe's energy crisis will be lifted."
"The UK has a long-term observation of economic development and has a relatively mature ability to predict and deal with cyclical economic crises." Li Guanjie pointed out, "Coupled with the fact that its economic structure is dominated by the service industry, its measures to deal with this round of economic crisis will be more effective than that of France and Germany." ”
The "retirement poverty" of the elderly in Germany is likely to increase
The UK is not the only European country facing high inflation. Aoyama, who lives in Berlin, Germany, told Phoenix Weekly that in the past two months, he has clearly felt that prices have risen, taking the sushi takeaway that he often orders as an example, in the past 40-50 euros (1 euro is about 6.9 yuan) to make two people "comfortable eating", and now the same money ordered to the portion "completely insufficient".
In the past six months, friends around me have often complained about the rise in restaurant prices, and families with children have felt that their living expenses have increased; Some people used to go to mid-range supermarkets to shop, but now they can only change to discount supermarkets.
For Aoyama, the biggest change in his daily life is to start using hot water sparingly - his family's faucet is driven in the direction of hot water all year round, and he usually uses hot water for brushing, washing his face, and soaking dishes, but recently, he has deliberately turned the faucet to the side of cool water.
Germany counts hot water and gas in addition to the "warm rent" in addition to the rent, and Aoyama once billed for a heating fee of up to 1,000 euros. Nowadays, energy prices are high, and the German government has also launched a number of energy-saving measures, and Qingshan has joined in with the idea of "saving money for himself and saving gas for society". According to a survey by The German magazine Business Insider, more than half of Germany's residents are starting to save energy like green hills.
Zhou Ruirui, a lecturer at the Department of Sociology at the University of Hamburg in Germany, noted that in order to save energy, some swimming pools in Hamburg have been suspended because most of the swimming pools in Germany are constant temperature swimming pools, which require a lot of energy consumption.
This summer, the German government introduced a special ticket price of 9 euros to encourage people to use public transportation, and ticket buyers can ride any bus and train on designated lines and seats across the country during the month. Zhou Ruirui told Phoenix Weekly that because of the recent high airfare prices, she felt that there were more people taking cheap transportation. When she travels by train this summer, the carriages are always full and sometimes there is no room to move around.
At Cologne Central Station in Germany, people are waiting to catch the train.
According to preliminary estimates from the German Federal Statistical Office at the end of August, annual inflation rose to 7.9% in Germany in August from 7.5% a month ago, returning to its all-time high in May.
Qingshan has no cars, houses, and no children, mainly uses public transportation for travel, shopping is not frequent, and his career is on the rise, and his life is relatively stable. He believes that he belongs to the group of people who are not affected by inflation.
But he mentioned that there is a phenomenon of "old age poverty" in Germany. According to a report released by the German Federal Government's Ministry for Family Affairs, Elderly Care, Women and Youth at the end of 2021, more than one in five people over the age of 80 have a monthly income or pension of no more than 1,167 euros (the poverty line for single-person households is 1,074 euros). Among the low-income elderly, women account for 26.1% and men only 16.9%.
As early as 2017, Marcel Fratzscher, director of the German Institute for Economic Research (DIW), predicted that the number of elderly poor people in Germany would increase significantly in the next 10 to 15 years. Today's inflation will further impact the quality of life of these elderly people, especially older women.
Data from market research firm Gfk shows that Germany's consumer confidence index has hit a new low since the survey began in 1991 due to the energy crisis and high inflation. Rolf Bürkl, an expert on consumer behavior at Gfk, said Germans were also starting to save in order to afford the sharply increasing energy bill.
On June 9, 2022, dock workers in Hamburg went on strike with a sign behind them that read," "Stop the devil of inflation."
Timmer Walmershauser, head of economics at the Ifo Institute of Economics in Germany, said Germans had accumulated about 70 billion euros of savings during the pandemic, but had been depleted from the end of 2021 to the first quarter of 2022, and the consumption trend remained in the second quarter. He argues that soaring inflation is the main cause and that there is no end in sight, meaning that personal consumption can no longer drive Germany's economic growth for the rest of the year.
According to the German Federal Statistical Office, Germany's gross domestic product (GDP) final value rose by 0.1% month-on-month in the second quarter, higher than the previous market expectation of zero growth; Year-on-year growth revised up to 1.8 percent, up from 1.5 percent at the initial value.
Some media said that even if it was plagued by the energy crisis in the second quarter, the German economy still showed tenacious resilience.
But even with resilience, this momentum is unsustainable. The Bundesbank said on August 29 that the German economy is likely to fall into recession this winter, and inflation of more than 7% for five consecutive months is likely to reach 10% in the autumn. The Bundesbank said inflation could rise significantly again as the bailout package expires in September; In addition, the increase in the statutory minimum wage and the depreciation of the euro will also cause additional cost pressures in the coming months.
Moritz Kraemer, chief economist at the Baden-Württemberg Bank (LBBW), expects Germany's economic growth to be negative next year. He noted that if Russia completely shuts down gas exports to Europe, Germany will experience a "very serious recession.". A "recession" means that the economy has experienced negative growth for two consecutive quarters.
On August 25, 2022, when German Chancellor Schoerz visited the University of Magdeburg, people protested the inflationary energy crisis and poverty, accusing the government of failing its work.
Affected by the energy crisis, the German government issued a decree in July allowing partially closed coal and oil power plants to be put back into service to save natural gas. This means that Europe's energy structure transformation, which has been carried out for many years, has embarked on a "turning back" in a critical moment.
Zhou Ruirui believes that the issue of restarting coal power will inevitably be opposed by some environmental groups, but there is not much room for discussion at the social level, "now power generation is to allow the country to continue to operate, otherwise the consequences of economic stagnation can not be afforded by anyone."
The eurozone economy is likely to fall into recession
According to Eurostat, the CPI of the 19 countries that used the euro rose 8.9 percent year-on-year in July, the highest level since the euro was officially issued in 1999. The Baltic states are all over 20 percent, while the Netherlands, Belgium, Greece, Spain, Cyprus, Slovenia and Slovakia are more than 10 percent.
Among them, the inflation rate in France, one of the "EU bellwethers", is about 6.8%, slightly lower than that of Germany. But with the country's gas and electricity price protection mechanism due to expire at the end of 2022, the French fear that energy bill prices could skyrocket next year, and what happened in the UK will repeat itself in France. French Prime Minister Borny recently tried to appease the mood in an interview with Le Parisien, saying that the government will retain a buffer mechanism and will not allow energy prices to soar.
The good news is that the eurozone's economic growth rate in the second quarter is still 0.7%, better than the previous forecast of 0.2%, despite the German economic growth rate of 0.1%. Among them, Spain and Italy benefited from the recovery of tourism in the two countries, with GDP growth of more than 1% each, and France also achieved 0.5% growth in the second quarter.
A man in Madrid, Spain, drags a newly purchased liquefied gas tank on March 28, 2022.
But according to the Financial Times survey, business activity in the eurozone is suffering its worst contraction since February last year. ECB officials say Europe now needs stronger monetary tightening policies to prevent runaway inflation. Coupled with the high temperature and drought in Europe this summer, the decline in the water level of the Rhine River in Germany has hindered shipping. A variety of factors have superimposed, and there are fears that the European economy may fall into recession. Resolving the energy crisis is clearly a top priority in saving the European economy.
Seth Carpenter, Chief Global Economist at Morgan Stanley, believes the eurozone economy is bound to sink into a deep recession. By the end of this year, the eurozone economy is expected to grow weakly; The eurozone economy is expected to experience a recession in the fourth quarter of this year. Moreover, with the ECB's almost single-minded focus on inflation, the ECB may not stop raising rates until there are conclusive data showing economic contraction or inflation normalization. This means that economic headwinds with high inflation and tight liquidity will not dissipate anytime soon in the eurozone.
Larry Elliott, economic editor of the British newspaper The Guardian, also pointed out that the current recession in Europe is not a question of "yes or no", but of degree and duration – to end all this, or to use the crisis to accelerate the pace of transition from fossil fuels, but this will take time; Either find an end to the Russo-Ukrainian war, but no side is willing to make a meaningful diplomatic attempt at the moment.
"For European governments, the only option left is to come up with a package to bail out consumers. Whatever the form, continuous, large-scale support is required. Elliott wrote.
(At the request of the interviewees, Zhang Xiaoyun, Li Xian, and Qingshan are pseudonyms)