More dangerous than Covid, the risks of war in Ukraine weigh heavily on financial markets and mortgage global growth

Russian President Vladimir Putin attended a meeting with Russian Defense Minister Sergei Shoigu at the Kremlin in Moscow on February 14, 2022.

Russian President Vladimir Putin attended a meeting with Russian Defense Minister Sergei Shoigu at the Kremlin in Moscow on February 14, 2022.


Atlantico Business

Tensions between the United States and Russia are such that they have pushed all the world’s financial markets into the red and are now seriously threatening the prospect of economic recovery.

The showdown between Vladimir Putin and Joe Biden now threatens to send global growth up the wall faster and stronger than Covid did. As the threat of war intensifies, the risks to economic growth increase.

For the first time, all financial markets have fallen sharply since Friday. Because the United States again warned that it would not accept a military aggression, because Joe Biden contacted the President of Ukraine to inform him that the dangers of Russian intervention were imminent and to confirm that NATO forces were will not allow that. happen. And that the response will go through economic sanctions against Moscow. In the process, Western allies were advised to protect their citizens in Ukraine and even evacuate them from kyiv. So far, France has asked its expatriates living in Ukraine to raise their attention, but they have not been asked to leave the country.

At the same time, tensions in Russia have clearly risen on the Richter scale, with increasingly deceptive statements from Russian officials.

Until the beginning of last week, when Emmanuel Macron was hired by Vladimir Putin, everyone thought that the main protagonists would emerge from the balance of this fear and finally be able to make a compromise to consider a diplomatic solution. .

The plans presented by the West, and in particular France, to offer a status of neutrality to Ukraine, in other words, to arrange a Finnishization of the former Soviet Republic, were rejected by the parties involved.

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Most international leaders take the threats of war more seriously, hoping that we are still in a posture, that no one will take action, but no one is certain … Hence the widespread panic in the markets in finance, which disrupts the economic outlook.

Contrary to what happened during the Covid era with markets absorbing risks very quickly, major financial centers were stuck at the end of last week and this stall seems to be lingering. Wall Street lost around 2% on Friday when Europe woke up on Monday with a 3% decline. This stall affects not only stock quotes, currencies but also cryptocurrencies like bitcoin. The entire financial planet seems weakened by the threats hanging over Ukraine.

And if this stall is very good, it’s because it involves economic risks. Prior to the effects of the war, staff of large companies assessed the impact of economic sanctions that would hinder a large portion of activity.

The economic zone that will be affected first is clearly Europe because Europe is dependent on Russia. First, rely on imported gas, which represents more than 40% of European consumption, but also on oil, the prices of which are exploding. The price of a barrel of crude will go straight to the wall of 100 dollars, which will push the price of fuel at the pump to more than 2 euros, not to mention the heating bill. The most affected: the countries of Northern Europe.

But the industry is in danger of being affected because we also import raw materials such as Russian aluminum used in the manufacture of vehicles. German industry has made its accounts. Its industry, which is already hampered by a shortage of electronic components, is in danger of stagnating due to a shortage of raw materials.

Initially, these glitches will result in price increases, so they stimulate the risks of general inflation.

Airlines, for example, will begin tracking flights crossing dangerous areas and as a result, insurance companies will raise their premiums.

The effects of Russia’s expulsion from the financial settlement system, the popular SWIFT system that manages international payments, still remain..

Currently there are more than 1000 European companies working directly in Russia and Ukraine and are at risk of paralysis, because all these companies work in dollars.

While last week, most Western chancelleries were still betting that Russia would not dare go to war because it could not tolerate economic and financial sanctions. Russia needs to sell its gas and its raw materials, Russia needs to import finished products, it needs German technology, it needs the West as much as Europe needs.

But since last week, Vladimir Putin’s voice has risen even more. Hence the collapse of financial markets and the scenario of cessation of activity. If the war scenario materializes, the dispute between NATO countries and Russia will lead to more serious consequences in the world than Covid because Covid did not destroy production assets. .

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