A grey gloom enveloped Brussels today. It was rainy and overcast. The weather reflected the forecast for Europe's economy delivered inside the Berlaymont.
The Commission’s Economic and Financial Affairs division laid out its vision for Europe’s economy. We’re at a crossroads, it says.
The main directions "...are either further weakening with the possibility of entering recession, a muddling through with a protracted period of low growth and low inflation..." or a rebound.
It concludes the economy "...is not likely to rebound in the near term..." and that we’re stuck with low growth rates for a long period which "...is a major shift compared to previous forecasts..."
That’s a very understated way to sound a very clear warning.
We’ve rightly focused in Ireland up to now on the clear and present danger of Brexit. Meanwhile, Europe has slowed to the point that its economy is practically flat lining. That’s important for us. Because it seems unlikely to be able to provide a safety net of demand for our goods and services if everything goes pear shaped with our nearest neighbours.
And it’s important because the symptoms Europe is showing are very hard to shake off.
The Commission itself points to commentary comparing the euro area today to the Japanese economy in the early 1990’s.
Following its boom and bust, Japan entered a long period of low growth, low inflation and low interest rates. It was characterised by "zombie firms" kept alive only because money was so cheap. And all the while, a population that was rapidly ageing.
So is Europe turning Japanese?
Officials say ‘No’. They point to progress made on reducing the bad debts left on the books of Europe’s banks after the financial crisis. They skip artfully over the potentially contentious issue of continuing negative interest rates.
The European Central Bank is independent after all! But they repeat a message gaining currency that translates as: monetary policy has done as much as it can...it’s time for the countries which can, to spend a bit more.
I lived in Japan for two years in the early 1990s. In a small mountain village, called Inami, a few hours from where I lived there was a bridge built at some cost to the local municipality.
It was called the ‘Kaeru’ bridge, a play on the word for frog (it’s built with a giant metallic frog over the arch) and the verb ‘to return home’. It was a symbolic effort to encourage the village’s young people scattered to the cities during the recession to return home.
It was a bit of a waste of money and added to the billions of yen spent by the Japanese government in the early part of the recession to stimulate its economy.
Commission officials say this is not what they have in mind.
There is much talk of re-inventing the fiscal rules governing national budgets in Europe to allow for investment in green technologies that will transform our economies and prepare us for climate change.
It’s also pointed out, with some evidence, that most European economies cut back significantly on investment in the years following the financial crisis.
So if there is space for governments to spend, that’s where it should happen.
In the meantime, there is another aspect of what’s going on across Europe - and this includes Ireland - that’s eerily similar to Japan. We’re saving more.
Despite getting nothing for our savings (see previous blogs) people are still putting money away. Just like in Japan.
One official compared this cultural factor with the US. In the US, people tend to save by investing...they put their money on the stock market. But as many people in Ireland know, that doesn’t always work out so well.
And why are people saving more?
There are several shifts going on right now which offer some explanation.
European economies sell a lot of goods to the rest of the world. But there are trade wars between the US and China and the US and Europe. This is all having a negative effect on trade and in turn making companies spend less and consumers more nervous about the future.
There are also shifts in particularly important industries.
Take the car industry. More people are mulling the idea of investing in an electric car but are perhaps hanging back to see if more choice becomes available and to see if they become cheaper.
Meanwhile, fewer people are buying diesel cars because cities across Europe are imposing penalties. In Ireland, a new NOX charge on diesel-linked emissions was introduced in the Budget.
So that means, more people saving and postponing a big purchase like a car.
But it also means it’s not a particularly good time to be working in the car industry - which is a big part of the German economy.
The current economic slough which Europe seems to have slid into is not as dramatic or existential as the euro zone crisis.
Employment levels have held up as jobs in the services sector have compensated somewhat for jobs lost in manufacturing.
So yes, let’s prepare to repel the clamour of Brexit but we can’t ignore the quieter, creeping economic fog that threatens to envelop our biggest trading bloc.