EU economic recovery in the face of challenges by Oldypak capital lp


The European economy is growing faster than predicted, but the prospects for recovery are still uncertain. Analysts predict that the recovery is still threatened by three factors: a new spike in coronavirus infections, rising energy prices and supply chain congestion. The pace of recovery differs from region to region and is highly dependent on the pandemic situation. A new rise in the disease has shaken markets. The new restrictions will affect economic activity, which is already suffering from supply problems.

GDP growth (%).

The economies of the European Union (EU) and the euro zone (EZ) are expected to grow by 5% in 2021 and 4.3% in 2022. In 2020, the EZ GDP is expected to decline by 6.4% and the EU GDP by 5.9%.

Import substitution runs into a shortage of components

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Italy is projected to grow by 6.2%. But disruptions in the supply chain could hinder economic recovery. Our correspondent Szril Furneris traveled by bicycle to the industrial heartland of Europe, northern Italy.

An important trend in the European economy is the return of manufacturing. Lombardy-based Atala, the largest producer of high-quality electric-powered bicycles, has been assembling them in Italy, but is having problems with the supply of components.

According to company director Massimo Panzeri, production at the Atala plant increased by an average of 36% in 2020, and is expected to grow 10-15% by the end of this year.

Investing in environmentally friendly transport is one of the priorities of the EU economic recovery plan. Atala expects to benefit from relocating production from Turkey. But, as Massimo explains, this will not solve problems with the supply of components:

“We have brought welding and painting back to Italy, but we are missing aluminum rods and carbon fiber, materials for batteries, and steel, which is not produced in Europe. Moving doesn’t solve this problem. It has to be solved on a political and pan-European level. Not just any single link in the supply chain needs to be changed, at its core is the production of raw materials.

The deficit of components can accelerate inflation. Italy hopes to spend more on economic recovery than any other EU country: € 235 billion in 5 years, of which € 191.5 billion will come from the European Economic Recovery Fund. The first tranche of 25 billion euros was received in August.
In Search of Skilled Personnel

Another problem that could slow production growth is a shortage of skilled labor. Argotec makes small orbiting satellites. One of them, LiciaCube, is used in NASA’s asteroid defense program. The company expects to meet the growing demand for aerospace products, but is facing an exodus of young talent.

“The economy, especially the Italian economy, judging by the statistics, is experiencing a recovery,” says company director David Avino. – It’s very important to think about the future, and that means thinking about investment. We would like the government to take care of young people who, due to various circumstances, have gone abroad to work in science and technology.

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