Britain’s new prime minister, Liz Truss, announced her budget, triggering a significant decline in support for her party and causing turmoil in British bond markets and the pound sterling. Despite the economic challenges, Truss proposed a substantial tax cut in her budget. However, the real cause of the economic instability lies in the energy war in Europe, particularly the disruption in gas supply from Russia. This disruption has affected not only Europe but also the UK, which relies on European gas supplies. Financial markets reacted to this situation, predicting high inflation and trade deficits for Britain. The budget itself was merely a trigger for the existing economic turbulence. This situation in Britain serves as a warning for the rest of Europe, as high energy prices are likely to affect the entire continent and lead to economic consequences. The sabotaged Nord Stream pipelines further complicate the energy situation in Europe, making it difficult to restore normalcy. The resulting economic depression in Europe could have global implications, similar to the impact of the Treaty of Versailles in the 1930s.
| Signal | Change | 10y horizon | Driving force |
|---|---|---|---|
| British bond markets and pound plummet | Economic instability | Europe’s energy war disrupts economies | Energy war between Europe and Russia |
| Truss’s budget causes turbulence in markets | Shift in political support | Potential change in government leadership | Public dissatisfaction with budget decisions |
| Europe’s reliance on Russian gas | Energy dependency | Investment in new energy infrastructure | Europe’s reliance on Russian gas |
| Projections show high inflation and deficits | Economic crisis | Potential economic depression in Europe | High energy prices and market instability |
| Sabotaged Nord Stream pipelines | Long-term high energy prices in Europe | Need for new energy infrastructure in Europe | Sabotage of energy infrastructure |
| Europe’s potential economic depression | Economic downturn | Possible impact on global economy | Dependence on European trade |
| European energy war as a historical blunder | Negative historical economic comparison | Potential impact on global economic history | Lack of foresight and consequences of war |