Latest / Stephanomics / Europe Just Might Dodge a Winter of Discontent

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Europe Just Might Dodge a Winter of Discontent · Stephanomics

• 0:00
  Speaker 1: He sings a love song as we go along Wagon
• 0:05
  Speaker 1: in Winter Wonderland, the medal we can build the slowm
• 0:14
  Speaker 1: Hello Stephanomics. Here the podcast that brings you the global economy.
• 0:18
  Speaker 1: And yes it does feel a little too soon for
• 0:21
  Speaker 1: Winter Wonderlands, but it is December, the month when shopkeepers
• 0:25
  Speaker 1: around Europe usually make most of their profit for the year.
• 0:29
  Speaker 1: And thanks to President putting the Christmas lights that typically
• 0:32
  Speaker 1: lure people into the central shopping districts aren't going to
• 0:36
  Speaker 1: be burning so brightly or as long. We're transporting you
• 0:40
  Speaker 1: to Zurich for that story. In a moment with a
• 0:43
  Speaker 1: cold front about to hit Europe, I also are star
• 0:47
  Speaker 1: columnist Xavier Blast an economist May Vakuza whether European governments
• 0:51
  Speaker 1: have done enough to put improve European energy supplies. If
• 0:56
  Speaker 1: European homes do stay warm through this winter, it turns
• 1:00
  Speaker 1: out they'll partly have China's COVID zero policies to thank.
• 1:04
  Speaker 1: So to round off this week's show, we have a
• 1:07
  Speaker 1: quick update from China government reporter Calum Murphy on the
• 1:10
  Speaker 1: protests that broke out earlier this week in more than
• 1:13
  Speaker 1: twenty Chinese cities. But first that story from Bloomberg Economy
• 1:18
  Speaker 1: reporter Bastition Ben Wrath in Zurich snowboard and we're selling
• 1:25
  Speaker 1: snowboarn in ski apparel. If people don't want to come
• 1:28
  Speaker 1: into town anymore to buy something like this and instead
• 1:31
  Speaker 1: only shop online, that hurts us very very much. That
• 1:34
  Speaker 1: was Tim Stickle. For thirty years now, his store called
• 1:38
  Speaker 1: rail Slide, has been the go to place for everything
• 1:41
  Speaker 1: related to skating and snowboarding in Frankfort, Central Germany. It's
• 1:46
  Speaker 1: located very conveniently. Shoppers can find it downtown, right between
• 1:50
  Speaker 1: Frankfort's style main Sharping Street and the rum Or Square
• 1:54
  Speaker 1: with its famed Christmas market. In the run up to
• 1:56
  Speaker 1: the holidays, that usually brings a lot of foot traffic
• 1:59
  Speaker 1: into a store war which shop is looking for snowboards,
• 2:02
  Speaker 1: jackets and gloves to put under the tree. But this
• 2:05
  Speaker 1: year things are different. Russia invaded Ukraine, which plans Europe's
• 2:10
  Speaker 1: relations with its main fuel provider into an ice age.
• 2:14
  Speaker 1: Energy prices on the continent are starring and governments are
• 2:17
  Speaker 1: looking for ways to save natural gas and electricity. In
• 2:22
  Speaker 1: this situation, Christmas lights have become a comparatively easy sacrifice
• 2:27
  Speaker 1: to cut down on energy use. European streets are traditionally
• 2:30
  Speaker 1: decorated with sometimes thousands of twinkling stars and fairy lights
• 2:34
  Speaker 1: for the season, but now more than a dozen cities
• 2:38
  Speaker 1: like Paris, London, Copenhagen, Zurich and Berlin have cut their lights, short,
• 2:42
  Speaker 1: reduced the area, or even outright band them. Frankfort is
• 2:47
  Speaker 1: among them, cutting large light displays and a number of
• 2:50
  Speaker 1: Christmas trees. For retailers like Tim, this is a cause
• 2:54
  Speaker 1: for concern. He doesn't have an online shop, so he's
• 2:57
  Speaker 1: dependent on people coming into town. Since the city year,
• 3:00
  Speaker 1: Frankfurt has also decided not to heat the toilets on
• 3:03
  Speaker 1: the Christmas market this year, another energy saving measure. He
• 3:07
  Speaker 1: worries that many people are going to stay home and
• 3:10
  Speaker 1: just shop online. This is the most important time of
• 3:15
  Speaker 1: the year. I'll say that around Easter we sell a lot,
• 3:18
  Speaker 1: and then at Christmas. I don't want to name precise proportions,
• 3:21
  Speaker 1: but Christmas does stand for a very, very large part
• 3:23
  Speaker 1: of our revenue. Worries about the holiday sales are echoed
• 3:29
  Speaker 1: throughout Europe, especially as other indicators have already suggested consumers
• 3:33
  Speaker 1: might spend a lot less on Christmas this year. Disposable
• 3:36
  Speaker 1: incomes shrun almost five percent globally between this summer and last.
• 3:41
  Speaker 1: According to recent figures from the Organization for Economic Cooperation
• 3:45
  Speaker 1: and Development, high energy prices and rising inflation rates are
• 3:49
  Speaker 1: eating away on the money people can spend. For retail experts,
• 3:53
  Speaker 1: this puts a big question mark over the likely success
• 3:55
  Speaker 1: of this year's holiday season. He is Marcel Staffel, who
• 3:58
  Speaker 1: leads the Council of Shopping Places in Switzerland. As it's
• 4:04
  Speaker 1: hard to make any forecasts because you always forecast based
• 4:07
  Speaker 1: on past data, but this year we had so many
• 4:10
  Speaker 1: out of the ordinary variables that you basically can't do that.
• 4:14
  Speaker 1: Going by consumer sentiment, it's certainly at an all time low.
• 4:18
  Speaker 1: You would expect catastrophic holiday sales. Judging from that, I
• 4:21
  Speaker 1: hope it won't be quite as severe as that absolute
• 4:24
  Speaker 1: tief stunt that Mustafa skin. But does cutting back on
• 4:30
  Speaker 1: nighttime lighting even makes sense? A closer look at the
• 4:34
  Speaker 1: power consumption of lights suggests that might actually not be
• 4:38
  Speaker 1: the case. An example from Paris, nighttime lighting of the
• 4:42
  Speaker 1: Eiffel Tower only accounts for four percent of the landmarks
• 4:45
  Speaker 1: electricity use, with heating and powering the commercial areas on
• 4:49
  Speaker 1: the tower's first floor using much more, But that didn't
• 4:52
  Speaker 1: stop Paris Mayor and Hidalgo from announcing that the towel
• 4:56
  Speaker 1: will switch off its lights an hour early age evening
• 4:59
  Speaker 1: to save energy. Luvantois kahnt sunk Ala Fern Christmas lights.
• 5:12
  Speaker 1: The magic word seems to be led. The company behind
• 5:15
  Speaker 1: the light ensemble on the Zurich's pricey band of strauss
• 5:18
  Speaker 1: A shopping street maintains that the entire installation of more
• 5:21
  Speaker 1: than twenty three thousand snowflake themed theodes doesn't use more
• 5:25
  Speaker 1: than three kilo one hours per hour. Let that's about
• 5:28
  Speaker 1: the same a household of and uses per hour if
• 5:31
  Speaker 1: you run it on maximum temperature. Still, the City Commission
• 5:34
  Speaker 1: of Zurich decided to half the time the lights are
• 5:37
  Speaker 1: on from about ten to five hours every day this
• 5:40
  Speaker 1: year for the sake of saving energy. So it seems
• 5:43
  Speaker 1: that in many places, cutting the Christmas lights might actually
• 5:47
  Speaker 1: be more about saving face than actually about saving energy.
• 5:50
  Speaker 1: And that also doesn't stop at retailers. Here is massive stuffle. Again.
• 5:58
  Speaker 1: If somebody now doesn't abstain all and says, hey, I'm
• 6:01
  Speaker 1: just doing my decorations like every year, and his lights
• 6:05
  Speaker 1: in are big and noticeable, then it may happen. Did
• 6:09
  Speaker 1: he get some critical comments like it, doesn't he get it?
• 6:13
  Speaker 1: You should really show some effort this year and save
• 6:16
  Speaker 1: energy wherever it's possible. So retailers are indeed torn on
• 6:20
  Speaker 1: whether they should put up Christmas lights. On the one hand,
• 6:23
  Speaker 1: they fear less festive atmosphere might hurt their sales. On
• 6:26
  Speaker 1: the other, however, they dragged being chastised by shoppers for
• 6:29
  Speaker 1: not making enough of an effort on saving energy. That
• 6:33
  Speaker 1: means that in Europe's major and minor shopping streets, he'll
• 6:36
  Speaker 1: be seeing shopkeepers who, in addition to the reduced lights outside,
• 6:40
  Speaker 1: also have decided to take down the lights inside their shops.
• 6:44
  Speaker 1: They are hoping that customers give them credit for that.
• 6:47
  Speaker 1: That is, if one inflation left some interest in shopping
• 6:50
  Speaker 1: and they didn't decide to stay home in the first place.
• 6:53
  Speaker 1: Staffel is going the other way. We're currently going through
• 6:58
  Speaker 1: such dark times. I wouldn't heard if we had some
• 7:01
  Speaker 1: Christmas lights. For Bloomberg News, I'm bath Jan Bnrad. So
• 7:10
  Speaker 1: while shopkeepers in Europe grapple with the morality of their
• 7:13
  Speaker 1: Christmas decorations, governments have for months now been trying to
• 7:17
  Speaker 1: ensure the lights and the heating stays on through the
• 7:20
  Speaker 1: winter in homes across the continent. But here we are
• 7:23
  Speaker 1: in December and it seems to have gone fairly well.
• 7:26
  Speaker 1: Today Bloomberg's in house energy consultants BENF predicted that a
• 7:31
  Speaker 1: large part of Europe might end the winter with their
• 7:33
  Speaker 1: gas storage still more than half full and with a
• 7:36
  Speaker 1: good shot of completely refilling again before Christmas three. That's
• 7:41
  Speaker 1: despite being largely cut off from Russian gas, which we
• 7:44
  Speaker 1: previously had thought would be completely devastating. So so what
• 7:48
  Speaker 1: went right and what's the long term impact of this
• 7:51
  Speaker 1: energy crisis going to be in Europe? Well, Bloomberg senior
• 7:54
  Speaker 1: Europe economist may have a Kuza and Bloomberg columnist and
• 7:59
  Speaker 1: best selling author, have you a blast? Two people with
• 8:02
  Speaker 1: a pretty shrewd take on those questions. Thanks both of
• 8:05
  Speaker 1: you for coming back on on Stephanomics. Maybe let me
• 8:09
  Speaker 1: let me start with you. I think remember, I mean
• 8:11
  Speaker 1: six months ago, maybe even less, there were some pretty
• 8:14
  Speaker 1: dark forecasts for what would happen to Europe without Russian gas.
• 8:19
  Speaker 1: Now it's December. President Putin has done his worst, but
• 8:23
  Speaker 1: we haven't seen lights going out across Europe. So so
• 8:26
  Speaker 1: what's happened? So just to start, I think some of
• 8:29
  Speaker 1: those forecasts where maybe a bit busimistic. Since July we
• 8:32
  Speaker 1: have followed our colleagues at BENEV thinking that actually the
• 8:36
  Speaker 1: winter could be rough, but energy systems would not collapse
• 8:40
  Speaker 1: for the winter. But still you're right that things have
• 8:43
  Speaker 1: gone better than could have been probably much better than
• 8:46
  Speaker 1: could have been expected. For one thing, first, energy supply
• 8:51
  Speaker 1: has been abandoned. High prices in Europe and lower demand
• 8:55
  Speaker 1: in Asia have already helped keep the supply coming, and
• 8:58
  Speaker 1: that has helped a lot. In addition, we've had some
• 9:00
  Speaker 1: mild weather at the start of the at the start
• 9:03
  Speaker 1: of the autumn, which has delayed the start of the
• 9:05
  Speaker 1: hitting season, which has helped. But the way beyond this
• 9:09
  Speaker 1: mild weather, we have seen very substantial reductions in the
• 9:13
  Speaker 1: mound where in excess of what people were expecting. I
• 9:16
  Speaker 1: think in the latest out look ben if he's looking
• 9:19
  Speaker 1: for some twenty percent reduction in the amount relative to
• 9:21
  Speaker 1: normal something like that. And finally, one last thing is
• 9:24
  Speaker 1: that I think, um, your open systems have also worked well.
• 9:28
  Speaker 1: I think your open energy networks and European solidarity has
• 9:32
  Speaker 1: held out so that we have sund Europe has kept
• 9:35
  Speaker 1: sending gas where it was most needed, and that has
• 9:38
  Speaker 1: been that has been It madeview quite quite a big
• 9:40
  Speaker 1: success as well. That's interesting you say about the solidarity,
• 9:44
  Speaker 1: because that had been a question mark about whether, you know,
• 9:47
  Speaker 1: if it came to it and the gas was kind
• 9:48
  Speaker 1: of in the wrong place, Like we know, German has
• 9:50
  Speaker 1: been quite good at building up supplies, would countries be
• 9:54
  Speaker 1: willing to send gas to those countries that were more
• 9:58
  Speaker 1: vulnerable And the idea that they been doing that, I
• 10:00
  Speaker 1: think is is interesting and again not something we would
• 10:03
  Speaker 1: necessarily expected. And I'm interested in what you say about
• 10:05
  Speaker 1: demand moever, because we tend to think that, you know,
• 10:09
  Speaker 1: people respond to incentives, and a lot of the extremely
• 10:14
  Speaker 1: expensive support for households that governments have given across the
• 10:18
  Speaker 1: continent has effectively cushioned them from the massive increase in
• 10:23
  Speaker 1: energy prices. And there's been criticism that that sort of
• 10:26
  Speaker 1: was reducing the incentive for households to reduce their demand
• 10:30
  Speaker 1: because they weren't seeing the full price increase. We've seen
• 10:34
  Speaker 1: bigger falls in places where households have seen a sticker
• 10:38
  Speaker 1: price of energy go up. So the first thing is
• 10:40
  Speaker 1: that electricity and gas prices, energy bills are still up
• 10:44
  Speaker 1: sixty percent Angelia in the euro area, so even if
• 10:47
  Speaker 1: maybe not as high as in the UK, it's still
• 10:50
  Speaker 1: a very large increasing gas bills and energy bias. And
• 10:53
  Speaker 1: in addition, I think the message that we needed to
• 10:55
  Speaker 1: save energy for geopolitical reasons has been quite strong everywhere.
• 10:59
  Speaker 1: So compling shion of geopolitical message and substantial increasing prices
• 11:04
  Speaker 1: has probably been enough to give the right incentives. We've
• 11:07
  Speaker 1: sort of focused on keeping the lights on. But obviously
• 11:12
  Speaker 1: the other side of this is the impact on the
• 11:13
  Speaker 1: economy and what are you looking at in terms of
• 11:16
  Speaker 1: the hit to the economy and the depth of the recession.
• 11:19
  Speaker 1: Is there any good news there? So we had some
• 11:22
  Speaker 1: good news from them from the energy side, mostly because
• 11:25
  Speaker 1: if you have at the same time quite a lot
• 11:27
  Speaker 1: of the main reduction and we've seen quite a substantial
• 11:31
  Speaker 1: decline in their spaces, sell a lot higher, but that
• 11:34
  Speaker 1: will help overall. We think that European countries will spand
• 11:38
  Speaker 1: about two point eight percent of their GDP on important
• 11:41
  Speaker 1: gas in twenty twenty three. That's up from one point
• 11:44
  Speaker 1: three percent, but at some point when prices were above
• 11:47
  Speaker 1: two euro without they would be spending more than nearly
• 11:51
  Speaker 1: five percent of their GDP. At the same time, if anything,
• 11:55
  Speaker 1: financing conditions have tightened much more than we could have
• 11:58
  Speaker 1: anticipated before the start of the e c B hiking sake,
• 12:02
  Speaker 1: and as a result, we still expect your area will
• 12:05
  Speaker 1: fall into a recision. It would be a major psisition.
• 12:08
  Speaker 1: But we still forecast your area to contract by not
• 12:11
  Speaker 1: point five percent in this quarter and a point four
• 12:14
  Speaker 1: percent next quarter and twenty three Party Technician of the Economy.
• 12:20
  Speaker 1: So we've got some of the really sort of downside
• 12:24
  Speaker 1: scenarios that we had for the economy that we're driven
• 12:26
  Speaker 1: by those really big increases in energy prices that we
• 12:30
  Speaker 1: had at the start of the autumn and early winter. UM,
• 12:33
  Speaker 1: those those sort of disaster scenarios have not come through.
• 12:37
  Speaker 1: But at the same time, globally, the cost of borrowing
• 12:39
  Speaker 1: has gone up for governments even as the before the
• 12:42
  Speaker 1: central banks really got started on raising official rates UM,
• 12:46
  Speaker 1: and that in itself is going to slow the economy.
• 12:49
  Speaker 1: So I guess it's it's it's a it's a mixed picture.
• 12:51
  Speaker 1: Have you a blast I should? I should bring you
• 12:53
  Speaker 1: in given your experience of global energy markets, but also
• 12:58
  Speaker 1: how European governments can often mess these things up. Have
• 13:02
  Speaker 1: they done better at the supply side of this crisis,
• 13:06
  Speaker 1: securing supplies of gas than you might have expected. I
• 13:11
  Speaker 1: think that they have done very well all considered, but
• 13:14
  Speaker 1: they have got very lucky with China. You could look
• 13:18
  Speaker 1: at the chart of global energy supplies and look at
• 13:22
  Speaker 1: how much China decrease his buying of lergy over the
• 13:28
  Speaker 1: last twelve months, and then compared to how much the
• 13:32
  Speaker 1: European Union or Europe including the UK have increased llergy purchases,
• 13:37
  Speaker 1: and it's almost one by one, it's all what China
• 13:40
  Speaker 1: has not boat has gone back to Europe. What will
• 13:43
  Speaker 1: have been the situation eve China have not been in
• 13:47
  Speaker 1: lockdown and with different COVID zero policy, I think it
• 13:51
  Speaker 1: will have been a lot more complicated for European countries
• 13:54
  Speaker 1: to operate. And then I'm very hesitant to say that
• 14:00
  Speaker 1: have done well or that the worst is over. At
• 14:03
  Speaker 1: the beginning of December, we have, depending on the weather,
• 14:07
  Speaker 1: ninety to a hundred and twenty days of cold weather
• 14:10
  Speaker 1: in front of us. It could be mile as it
• 14:13
  Speaker 1: has been the case of most of November and most
• 14:16
  Speaker 1: of October. Actually, we have had one of the milder's
• 14:20
  Speaker 1: um pre winter periods in recent history in Western Europe.
• 14:26
  Speaker 1: Or it could be extremely cold and then we will
• 14:28
  Speaker 1: be in deep trouble. I mean to to to think
• 14:32
  Speaker 1: that everything is fine in December, when we have three
• 14:36
  Speaker 1: what I will call very miserable um um months in
• 14:41
  Speaker 1: front of us, I think it will be it will
• 14:43
  Speaker 1: not be the right thing to do. We spected like
• 14:46
  Speaker 1: a Spaniard who lives in London. I may have thought
• 14:49
  Speaker 1: that when I was walking out of my house this
• 14:52
  Speaker 1: afternoon for a sanguige, and I did thought why I'm
• 14:55
  Speaker 1: living here in the UK. So okay, So that's one
• 15:01
  Speaker 1: thing that could go wrong. We could get some pretty
• 15:04
  Speaker 1: grim winter. I guess Another side of this is just
• 15:07
  Speaker 1: how much it's cost governments to secure this supply. I mean,
• 15:11
  Speaker 1: you make a fascinating point about China um and them
• 15:15
  Speaker 1: having been lucky with that, but there have also been
• 15:17
  Speaker 1: these deals with Qatar and with other places. I mean,
• 15:21
  Speaker 1: have it has it? Has this been done in any
• 15:23
  Speaker 1: way efficiently or has it just been done in a
• 15:27
  Speaker 1: mad scramble. It has been done in a bit of
• 15:31
  Speaker 1: a mother scramble. But I think that considering the time constraints,
• 15:35
  Speaker 1: considering the difficulties, it has actually gone relatively well in Europe.
• 15:41
  Speaker 1: I think that it has worked well. I think that
• 15:44
  Speaker 1: the European solidarity has ward to a point although Germany
• 15:47
  Speaker 1: has both um ellen gy and GUS supplies or whatever,
• 15:52
  Speaker 1: the price was needed to make sure that they had
• 15:54
  Speaker 1: enough inventories and pushing up prices for the rights of
• 15:58
  Speaker 1: Europe quite considerably. But just considering how countries have to
• 16:02
  Speaker 1: do these uh with just basically a Russian gun pointing
• 16:08
  Speaker 1: at at their heads of the policy makers, I think
• 16:11
  Speaker 1: that it has done quite efficiently. Has it been very expensive, Yes,
• 16:16
  Speaker 1: has been massively expensive. Even at current prices um which
• 16:21
  Speaker 1: are much lower than that we saw in July Augos.
• 16:26
  Speaker 1: We are talking about a hundred and thirty euros per
• 16:29
  Speaker 1: megaat our. That compares to what you used to consider
• 16:34
  Speaker 1: a normal price of about twenty euros per mega at hour.
• 16:38
  Speaker 1: So I think that yes, we managed to buy in
• 16:41
  Speaker 1: off gas. We got very lucky with China been in
• 16:46
  Speaker 1: in the status of permanent lockdown, and then we got
• 16:49
  Speaker 1: very lucky with a very mild start of the of
• 16:52
  Speaker 1: the winter, who has led Europe to start December in
• 16:57
  Speaker 1: a very comfortable position. But let's not forget that now
• 17:02
  Speaker 1: every day we're going to be consuming guys from inventories,
• 17:05
  Speaker 1: and there is not Russian guys be a pipeline to
• 17:09
  Speaker 1: help us rebuild the inventories necess spring and China maybe
• 17:14
  Speaker 1: or may not be back and open and consuming lerg
• 17:19
  Speaker 1: and so all of those factors made me a bit
• 17:23
  Speaker 1: and comfortable. And we have seen a couple of days
• 17:27
  Speaker 1: of a bit of windless weather and a bit of
• 17:31
  Speaker 1: colder temperatures, um like the day that we are recording
• 17:35
  Speaker 1: this podcast, which made me prone. They thought about going
• 17:39
  Speaker 1: back to Spain for sunshine. And the electricity system in
• 17:44
  Speaker 1: the UK and France have really been tested and it
• 17:49
  Speaker 1: has been pretty tied. So you wouldn't rule out the
• 17:53
  Speaker 1: chance having still having blackouts or para outages at some point. No,
• 18:00
  Speaker 1: not at all. I think I think that that is
• 18:02
  Speaker 1: still a very reasonable case. I think that that's the
• 18:04
  Speaker 1: reason why government remain fully prepared for that. UM. France
• 18:09
  Speaker 1: is a country that could suffer trouble in early January,
• 18:13
  Speaker 1: particularly if it gets very cold and more nuclear reactors
• 18:16
  Speaker 1: are repairs are delay, as it has been the case
• 18:19
  Speaker 1: in the last few weeks. So I would not say
• 18:22
  Speaker 1: do I think that we are better than where I
• 18:25
  Speaker 1: thought that we will be a couple of months ago. Yes,
• 18:27
  Speaker 1: we are do I think that we are out of
• 18:30
  Speaker 1: the boots. I think that it is too early to
• 18:33
  Speaker 1: to say. And I think that more things could happen.
• 18:36
  Speaker 1: To think that bloody mill putting will not try something else, um,
• 18:41
  Speaker 1: it will be a naive. He may have some other
• 18:45
  Speaker 1: measures to try to put more pressure on Europe this winter.
• 18:50
  Speaker 1: Every time that we thought about pluting, will not there
• 18:54
  Speaker 1: to do something else. He will not cut these supplies.
• 18:57
  Speaker 1: He will not cut these other supplies. He will not
• 18:59
  Speaker 1: threaten the pipelines. And he did it. So to think that,
• 19:03
  Speaker 1: you know, he would not try to do something pre Christmas,
• 19:06
  Speaker 1: I think it would be very naive. What kind of
• 19:09
  Speaker 1: thing has he got up in sleeves still? What? What?
• 19:12
  Speaker 1: What kind of scenarios? Well, he can still cut more,
• 19:16
  Speaker 1: He can cut the few molecules b bcms, billion, quvick
• 19:22
  Speaker 1: meters that he's still chipping into Europe ironically via Ukraine. Um,
• 19:28
  Speaker 1: and he can threaten the physical integrity of pipelines. And
• 19:31
  Speaker 1: I think that to me, the most concerning thing for
• 19:34
  Speaker 1: this winter is the threat of cyber attacks on the
• 19:36
  Speaker 1: electric degreed. Then that that is what every you told
• 19:41
  Speaker 1: to them privately, that every senior executive of the electricity
• 19:47
  Speaker 1: UM industry is worried is cyber attacks this winter. Let's
• 19:50
  Speaker 1: not forget there was a cyber attack UM not that
• 19:54
  Speaker 1: long ago, the last couple of years against the biggest
• 19:58
  Speaker 1: refined products pipeline and in the United States, which is
• 20:01
  Speaker 1: called colonial that pipeline was stop working. It triggers shortages
• 20:06
  Speaker 1: of gasoline in the eastern course of the United States.
• 20:09
  Speaker 1: And the cyber attack was a commercial hack. It was
• 20:13
  Speaker 1: done by demanding a Ramson. They wanted money, but he
• 20:17
  Speaker 1: originated from Russia. Mhm. And if the goal was to
• 20:21
  Speaker 1: deprive Russia of the benefits of high energy prices, you know,
• 20:25
  Speaker 1: there's been lots of governments who've talked about this, and
• 20:27
  Speaker 1: we've talked about price caps at various points. President Biden
• 20:31
  Speaker 1: is still looking for an oil price cap. Is that
• 20:33
  Speaker 1: going to happen? I mean, we have we found a
• 20:36
  Speaker 1: way to punish Russia via that via from that direction,
• 20:42
  Speaker 1: we haven't. And the main problem is that the price
• 20:45
  Speaker 1: caps are trying to square a circle. I mean, you
• 20:49
  Speaker 1: cannot reduce the price and artificially dictate what the price
• 20:52
  Speaker 1: is going to be unless European government are willing to
• 20:56
  Speaker 1: UM for in the case of natural gas, are willing
• 20:59
  Speaker 1: to put some compulsory demand response to to make that happen.
• 21:04
  Speaker 1: You cannot say the price cannot go above that particular
• 21:06
  Speaker 1: price level unless you are willing also to say, well,
• 21:09
  Speaker 1: demand cannot go above a particular level. And that's the
• 21:13
  Speaker 1: reason why the European Commission has proposed this price cap
• 21:17
  Speaker 1: that doesn't cap anything at a very high level, with
• 21:20
  Speaker 1: a lot of additional UM requirements. In particular the requirement
• 21:26
  Speaker 1: that prices need to be at a very high level
• 21:28
  Speaker 1: for ten consecutive trade in there is something that it
• 21:31
  Speaker 1: didn't happen even when prices went through the roof in July,
• 21:35
  Speaker 1: and augoes uh and I think that the main reason
• 21:38
  Speaker 1: that they designed that way is because they knew that
• 21:41
  Speaker 1: they needed to create a cap that will not work.
• 21:44
  Speaker 1: So everyone who wanted a cap could say, oh, we
• 21:47
  Speaker 1: what we got the cap. That's our political win. And
• 21:50
  Speaker 1: everyone who thinks a cap is a bad idea said, well,
• 21:54
  Speaker 1: they have a cap, but it doesn't work. So that's
• 21:55
  Speaker 1: also a political win for us UM. And that's the
• 21:58
  Speaker 1: gas cap that the the European Union is debating at
• 22:01
  Speaker 1: the moment. Finally, if we're sort of stepping back. I
• 22:04
  Speaker 1: noticed that the Economists had on its cover it had
• 22:07
  Speaker 1: a sort of picture of the of a frozen European
• 22:09
  Speaker 1: continent saying how the world is leaving Europe behind. It
• 22:13
  Speaker 1: was suggesting that although there's been some sort of short
• 22:15
  Speaker 1: term good news that we've discussed, the crisis has cost
• 22:21
  Speaker 1: Europe deer and highlighted how the continent is failing to
• 22:25
  Speaker 1: keep up with the rest of the world and certainly
• 22:27
  Speaker 1: the US and China. Do you think that's right? That
• 22:30
  Speaker 1: this is a further nail in the coffin for for
• 22:33
  Speaker 1: Europe's economic model. I mean, eurobe is going to have
• 22:36
  Speaker 1: a problem because he's going to face much higher energy
• 22:39
  Speaker 1: prices that other rediunts of the wall for for for
• 22:43
  Speaker 1: for longer. I mean, you look at where natural guys
• 22:45
  Speaker 1: is training right now in the United States is something
• 22:48
  Speaker 1: around um uh seven dollars per m b tu Europe
• 22:54
  Speaker 1: and an equivalent basis is being something like forty. So
• 22:58
  Speaker 1: you are there, CEO of a big chemical plan, and
• 23:02
  Speaker 1: you have the choice where you said home in Germany
• 23:07
  Speaker 1: or in Texas. I think that the answer is is
• 23:11
  Speaker 1: very simple. You got to Texas. I mean, there is
• 23:13
  Speaker 1: not even a question about it. I think that some
• 23:16
  Speaker 1: European policymakers are beginning to shave away from the initial thought, um,
• 23:23
  Speaker 1: initial worried of high gas prices, that was mostly on
• 23:27
  Speaker 1: course of living an inflation. And now they're beginning to
• 23:29
  Speaker 1: think more about the industrialization of Europe. And that is
• 23:33
  Speaker 1: something that I have been hearing quite lot from central bankers,
• 23:38
  Speaker 1: in particular, that there is the second impact of the
• 23:41
  Speaker 1: gas crisis, that the industrialization of Europe. What they are
• 23:44
  Speaker 1: worried now. UM. You know, the way I put it
• 23:50
  Speaker 1: is uh six six six, and that's not any any
• 23:53
  Speaker 1: don't don't look at it in any particular devilish way.
• 23:57
  Speaker 1: But when the invasion of Ukraine has start back in February,
• 24:01
  Speaker 1: when I was talking to executives of big European energy consumers,
• 24:06
  Speaker 1: they were prepared for a six week crisis. UM. At
• 24:11
  Speaker 1: the end of March the beginning of April, UH and
• 24:15
  Speaker 1: when it was very clear that Ukraine was able to
• 24:19
  Speaker 1: defend itself much better than many thought, they they're thinking
• 24:23
  Speaker 1: a month, executives shifted and I said, okay, well, this
• 24:26
  Speaker 1: is not gonna be a six week crisis. This is
• 24:29
  Speaker 1: gonna be a six months crisis. And six months later,
• 24:33
  Speaker 1: the thinking is now, well, this may be a six
• 24:37
  Speaker 1: year crisis because the global elegy market is gonna remain
• 24:41
  Speaker 1: tied somewhere until twenty six PERHP seven. And that's why,
• 24:46
  Speaker 1: you know, that's what the six weeks six months, and
• 24:49
  Speaker 1: now they're thinking about six years, perhaps a bit less
• 24:52
  Speaker 1: than than six years. But allow me to do the
• 24:54
  Speaker 1: six six six, And I think that that is it's
• 24:57
  Speaker 1: very problematic because you do not changed your business plans
• 25:02
  Speaker 1: for six weeks. I don't think that any executives really
• 25:06
  Speaker 1: make any fundamental business plan change for six months either
• 25:12
  Speaker 1: other than some adjustments and let's reduce some production here,
• 25:16
  Speaker 1: let's try to save some money there, you know, delays
• 25:18
  Speaker 1: on investments. But if you think that this is a
• 25:21
  Speaker 1: six year problem, for six years, executives do really start
• 25:25
  Speaker 1: to think harder about what they need to do different. Well, great,
• 25:31
  Speaker 1: leave us on and up. Why don't you have ya?
• 25:33
  Speaker 1: Thank you so much, Maybe have your blass Thank you
• 25:38
  Speaker 1: Mava and Zurich, and have you in London. I promise
• 25:41
  Speaker 1: you by your sweat of Christmas. But I appreciate both
• 25:45
  Speaker 1: of you coming on. Why, well, we just learned that
• 26:13
  Speaker 1: China's troubles exiting COVID had produced unexpected benefits for Europe
• 26:18
  Speaker 1: in its search for extra gas supplies, but we can
• 26:22
  Speaker 1: see it is causing continued confusion and continued challenges for China.
• 26:27
  Speaker 1: And this week anyone listening will have seen you had
• 26:32
  Speaker 1: those very unusual street protests in China. So I just
• 26:40
  Speaker 1: wanted to check back in with Carlin Murphy, who we
• 26:43
  Speaker 1: talked to a few months ago, our government reporter in Beijing,
• 26:49
  Speaker 1: although currently in Hong Kong column. Thank you very much
• 26:52
  Speaker 1: for coming on. I mean, briefly, where do things stand
• 26:55
  Speaker 1: the nationwide sort of protests that we saw over the weekend,
• 26:59
  Speaker 1: one source putting it at forty three protests in twenty
• 27:02
  Speaker 1: two cities. They have definitely quietened down. On a Monday
• 27:05
  Speaker 1: night and Tuesday night in places like Beijing and Shanghai,
• 27:08
  Speaker 1: there were very few people out right now. It's a
• 27:10
  Speaker 1: bit quiet, and of course the main factor of that
• 27:12
  Speaker 1: is the sheer number of police that have been on
• 27:15
  Speaker 1: the street, and and the stick element of this is
• 27:18
  Speaker 1: a very very strong, and I think it is putting
• 27:21
  Speaker 1: people off. And on Wednesday, we heard, of course about
• 27:24
  Speaker 1: the passing of the former president Jang Zimen. That brings
• 27:28
  Speaker 1: up immediately the question how this might impact the protest.
• 27:32
  Speaker 1: Will we see more people taking to the streets, whether
• 27:36
  Speaker 1: it be to memorialize the president or to express further
• 27:41
  Speaker 1: their discontent with the current situation. So of course, everyone
• 27:44
  Speaker 1: in Britain anyway likes to see everything through the lens
• 27:47
  Speaker 1: of football, and there was has been a lot of
• 27:49
  Speaker 1: debate about how much the pictures from the World Cup
• 27:52
  Speaker 1: of fans mingling had helped to trigger this, But one
• 27:56
  Speaker 1: of our colleagues was pointing out that they were also
• 27:58
  Speaker 1: all these pictures of the president sieging ping with other
• 28:02
  Speaker 1: leaders at the G twenty summit recently, also unmasked and
• 28:06
  Speaker 1: and in confined spaces. So do you think that was
• 28:08
  Speaker 1: a that was a factor as well? I believe so.
• 28:11
  Speaker 1: I mean, the original spark of this was a fire
• 28:13
  Speaker 1: that took place in the city of Urumchi, which is
• 28:16
  Speaker 1: the capital of the Shinjiang region in the far western
• 28:20
  Speaker 1: part of China. They're in a high rise building. About
• 28:24
  Speaker 1: ten people, according to official statistics, were burned to death
• 28:28
  Speaker 1: in a fire that many people said was preventable. There
• 28:32
  Speaker 1: was rumors going around that people had been locked in
• 28:35
  Speaker 1: that fire trucks could not have access to the building.
• 28:38
  Speaker 1: Um circulation online of videos showing that people were crying
• 28:41
  Speaker 1: inside the building as the flames engulfed that. But of
• 28:50
  Speaker 1: course all of this was denied by the local governments,
• 28:53
  Speaker 1: who said, almost in an arrogant way, that the doors
• 28:56
  Speaker 1: were clear and open, but that it was the people
• 28:58
  Speaker 1: who decided not to run and leave the building. And
• 29:02
  Speaker 1: in contrast to that, then you have this celebration going
• 29:05
  Speaker 1: on at the World Cup and of course the visiting leaders,
• 29:09
  Speaker 1: So people are watching these images of celebrations taking place
• 29:13
  Speaker 1: at the World Cup. Meanwhile at home in China, the
• 29:17
  Speaker 1: people are living under very strict conditions and the hardship
• 29:20
  Speaker 1: is quite pronounced. So it really underscores the fact that
• 29:25
  Speaker 1: the world has moved on, but China hasn't. And if
• 29:29
  Speaker 1: we're just looking at it through a sort of economic lens,
• 29:32
  Speaker 1: it's was striking. I mean, it was interesting and very
• 29:35
  Speaker 1: unusual to have so many cities involved in this, but
• 29:39
  Speaker 1: as we as we know, the numbers were quite small.
• 29:41
  Speaker 1: I wonder, I mean, in economic terms, the significance of
• 29:44
  Speaker 1: that of the walkouts and the riots at the in
• 29:48
  Speaker 1: the big in the sort of iPhone city, in that
• 29:50
  Speaker 1: massive fox com um complex, is that potentially more significant
• 29:56
  Speaker 1: for for the Chinese economy, I think it's back to
• 29:59
  Speaker 1: the COVID issue and how how quickly they will um
• 30:02
  Speaker 1: address that, or whether they will take the protesters concerns
• 30:07
  Speaker 1: and try to allay those fears and then sort of
• 30:10
  Speaker 1: relax the COVID regulations. That would be the biggest way
• 30:13
  Speaker 1: to have an impact on the economy. But if they
• 30:15
  Speaker 1: continue to pursue, uh, you know, the policies as they are,
• 30:20
  Speaker 1: then we will continue to see this economic downturn. And
• 30:24
  Speaker 1: this is particularly a problem for the younger people. So
• 30:29
  Speaker 1: we have a lot of young people making up the
• 30:31
  Speaker 1: protesters and they're having difficulty finding jobs, and youth unemployment
• 30:38
  Speaker 1: is almost record high. So I think, you know, this
• 30:40
  Speaker 1: is economic issues are definitely underpinning this, But in terms
• 30:45
  Speaker 1: of the numbers and having an impact on the economy
• 30:47
  Speaker 1: per se, I think it's still, as you say, quite small.
• 30:50
  Speaker 1: The bigger impact will come from whether or not they
• 30:53
  Speaker 1: decide to relax the COVID regulations or not. I mean,
• 30:57
  Speaker 1: there is quite a lot of confusion over where things
• 30:59
  Speaker 1: stand on the on the COVID, on the on the
• 31:01
  Speaker 1: exit out of COVID, because although we had, as you say,
• 31:05
  Speaker 1: there's big show of force in response to these these protests,
• 31:08
  Speaker 1: a lot of police out on the street. We also
• 31:11
  Speaker 1: had messages out of the government that seemed to be
• 31:14
  Speaker 1: adjusting the course and even responding to some of the
• 31:20
  Speaker 1: opposition to COVID policy. So has there been a softening.
• 31:24
  Speaker 1: So our reporting is pointing to a softening, and there
• 31:28
  Speaker 1: have been some isolated reports here and they're suggesting that
• 31:32
  Speaker 1: perhaps maybe COVID is not so bad after all. But
• 31:35
  Speaker 1: you know, these are really very sort of preliminary and
• 31:39
  Speaker 1: not sort of orchestrated in a in a centralized way.
• 31:42
  Speaker 1: Yet I think the important thing to remember at all
• 31:46
  Speaker 1: times is that COVID zero basically is cheeting pings policy,
• 31:52
  Speaker 1: and anything that sort of moves the dial on that
• 31:55
  Speaker 1: is really going to reflect directly on him. And even
• 31:59
  Speaker 1: the protests of are are a huge embarrassment for him
• 32:02
  Speaker 1: just after receiving, you know, the backing of the whole
• 32:06
  Speaker 1: party at his coronation during the Congress. So basically it's
• 32:10
  Speaker 1: like this is going to be really difficult to shift.
• 32:14
  Speaker 1: Even though we might be seeing some early sort of
• 32:18
  Speaker 1: indications of softening, I think it's going to take time.
• 32:21
  Speaker 1: Colin Murphy, thank you. Well, that's it for Stephanomics. We'll
• 32:32
  Speaker 1: be back next week. In the meantime, please rate us
• 32:34
  Speaker 1: wherever you get this podcast, and check out the Bloomberg
• 32:37
  Speaker 1: News website for more economic news and views on the
• 32:40
  Speaker 1: global economy. You should also follow at economics on Twitter.
• 32:44
  Speaker 1: This episode was produced by Yang Yang, Summer Sadi, and
• 32:47
  Speaker 1: Mangnus Hendrickson, with special thanks to Colin Murphy, Bastian ben Wrath,
• 32:52
  Speaker 1: Mava Kusin, Xavier Blasts, and of course Tony Bennett. Mike
• 32:56
  Speaker 1: Sasso is the executive producer of Stephanomics.