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Europe must jointly address the raw materials crisis

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The added inflationary risk factor threatens to slow down the growth of EU economies, all of which are highly dependent on raw materials imports.

One of the more concrete risks threatening the economic recovery in the EU is the impact shortages of raw materials and capital goods are having on manufacturing. Global economic activity thawing along with a sharp rise in consumption along with tensions in shipping have resulted in shortages and a rise in prices for basic materials, especially in sectors such as semiconductors, chemicals, plastics, and wood. Due to this perfect storm, bottlenecks have appeared in the industry -the automotive industry was one of the first to experience them – which is not affecting all economies equally, but which together is damaging the activity of 40% of European manufacturers. While the percentage of companies affected in Germany reaches 70%, it is only 22% in Spain.

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The sharp drop in supply of raw materials and capital goods coupled with the strength of demand has created a cyclical imbalance, but if the bottleneck in factory production continues to affect other branches of activity, such as transportation, wholesale trade, and some professional services, its effects may be very serious.

The ebbs and flows of the market can correct some of these dysfunctions, but others are due to tariff policies and import quotas which must be redesigned in order to better align the production and transportation of goods to the real needs of the economies. Raw material price increases are a concern that is affecting the whole of Europe and are seen as an inflationary risk that may slow the growth of the Community economies, which are all highly dependent upon imports. Therefore, it seems reasonable to think about a comprehensive European strategy to guarantee the supply of industry and protect the EU from an event that could undermine the recovery.

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Michelle D. Madsen

Michelle D. Madsen graduated from the University of Westminster and has been deeply involved in the world of finance ever since. She has worked as a Broadcast Journalist hosting various news shows and informative webcasts about the financial markets. Since 2004 she has also been writing for Metanews daily, her attention to detail, and her in-depth knowledge of the financial markets have led her to cover Foreign Exchange and commodities. The world of finance has changed in the last few years with the introduction and rising popularity of cryptocurrencies. She has in no means been left behind, adding this to her bank of intellect and is now also an expert in cryptocurrencies. For the last ten years, Ms. Madsen has been engaged in the financial market. She has notedly written a great number of incredibly informative reviews for the crypto exchange and forex brokers. Her wealth of knowledge has enabled her to become a leading expert in the field. She continues to inform the public writing up-to-date, thorough reviews for the readers of Metanews as she has for the last decade.
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