Europe’s economy looks set to avoid the severe shock that the region feared amid the energy crisis resulting from Russia’s invasion of Ukraine. But the region’s medium-term problems look harder to fix, and leave Europe facing a struggle to retain its industrial core.
Russia’s war on Ukraine and its economic fallout has shaken Europe’s export-oriented business model. Skyrocketing energy prices threaten industries at the heart of the continent’s manufacturing system, such as chemicals and metal production. Businesses around Europe are reducing production and starting to redirect investment overseas, including to the U.S., which is luring foreign companies with hundreds of billions of dollars in subsidies.
