Europe on the Edge of a New Economic Fall

Now that the Gaza agreement appears to be entering a positive phase and European leaders such as Emmanuel Macron and Belgium’s Foreign Minister Maxime Prévot breathe diplomatic sighs of relief, a far greater storm looms elsewhere.
Behind the façade of geopolitical symbolism lies the risk that Europe may be heading for another economic crash — reminiscent of 2008.

According to Bank of America, European stock markets could fall by 10 to 20 percent in 2026, a warning that so far has received little political attention. Yet the underlying signals are unmistakable: slowing growth, rising public debt, and a fading industrial base. The appearance of stability is cracking.

🧠 Economics Is Not a Science — It’s Psychology

When I studied economics in the 1980s, it was presented as an exact science — based on equations, models, and rational expectations.
But economics is not mathematics. It is mass psychology.

History’s Nobel laureates prove it. Think of Daniel Kahneman and Robert Shiller, who showed that markets behave like humans — fearful, greedy, and herd-like. Investors follow each other upward in times of euphoria and plunge together into panic.
The market is not logical — it is emotional. And that is precisely why it keeps repeating its mistakes.

⚡️ Since the War in Ukraine: Structural Weakness Beneath the Surface

The war in Ukraine has deeply disrupted Europe’s economy.
Energy prices remain well above pre-2022 levels. In some countries, gas is still two to three times more expensive than before the invasion, and electricity prices for industry stay elevated.

Meanwhile, public debt continues to climb:

• France hovers around 111% of GDP,
• Italy exceeds 137%,
• and even fiscally disciplined Germany approaches 63%.

With rising interest rates, that debt becomes a ticking time bomb.

The German industrial sector, once the engine of Europe, is losing ground. Exports of German cars to China have fallen by nearly 70%, while imports of Chinese electric vehicles into the EU have soared by more than 400%. China now sells more “green” vehicles to Europe than Europe produces itself.

🔋 The Green Dream as a Chinese Reality

What was meant to be a European green revolution has turned into a Chinese export strategy.
According to Eurostat, the EU imported €19.7 billion worth of Chinese solar panels in 2023, while exporting less than €1 billion. The entire green-tech supply chain — from solar modules to batteries — depends on Chinese production.

China has masterfully “conquered” the European Commission without firing a shot, merely through economic dependence.
Europe regulates; China manufactures.
Europe debates; China sells.

And while China floods the world with green technology, Europe hides behind regulations that constrain the rise of artificial intelligence. In the race for innovation, Europe prefers caution over creativity. That is not policy — that is fear.

🕊️ Gaza as Diversion, Not Breakthrough

The Gaza issue gives European leaders temporary moral capital: a chance to shine diplomatically while their economies falter.
But when the smoke clears, economic reality returns.

People feel the difference not in diplomatic gestures, but in purchasing power, jobs, and energy bills.
The deflection of domestic problems through geopolitical theater has reached its limit.

History repeats itself: in times of tension, populists seek scapegoats — often through antisemitic or anti-migration narratives. The tactic is ancient; the consequences are always new.

📉 A Self-Fulfilling Prophecy

Markets rise on optimism and fall on fear.
As soon as investors suspect the party is over, they begin to cash in their gains — exactly what is happening now, ahead of the holiday season.
The result is a self-fulfilling prophecy: the expectation of a fall causes the fall.

Economics is no natural law.
It is the product of collective behavior — millions of decisions, emotions, and illusions.
In bull markets, investors behave like sheep following the shepherd.
But when they reach the cliff, only a few are wise enough to turn back.

🔮 Europe’s Choice: Protection or Performance

Europe faces an existential choice.
It can continue to regulate, control, and slow down — or it can dare to innovate again.

Prosperity is not created by writing rules for foreign innovations, but by creating, investing, and experimenting itself.
The world will not wait for Europe’s caution.

If Europe fails to understand that the new economy is built on AI, energy independence, and productive courage, it will once again learn that history shows no mercy to those who stand still.

🧭 Final Reflection

Europe’s coming crisis will not arise by chance, but from complacency.
The next fall will not be caused by banks or mortgages, but by the slowness of its own thinking.
To understand economics, one must not only read numbers but understand people.
Because in the end, it is not the market that decides — it is the trust we still place in it.