The Spanish economist explained that it was becoming too late for the European Union to tackle inflation as he assessed how Governments in bloc were struggling to contain deficit spending. Mr Lacalle claimed that the current energy policies were making Europe more dependent on Russian energy. Countries in the West are bracing for a tough winter due to the ongoing cost of living crisis which is plunging people into poverty, due to ongoing price rises.
Mr Lacalle told CNBC: “You just mentioned two key points, the wrong energy policy, and the wrong monitor end physical policy.
“We have seen the ECB drag its feet for too long, it’s becoming too late to take action on inflation.
“At the same time, you have most of the peripheral Governments and the European Union in general unable to contain the deficit spending.
“In an environment in which there is also for the first time in years, a trade deficit.
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Mr Lacalle added: “Which weakens the Euro, and on top of that an energy policy that has made Europe more dependent on Russian gas.
“And certainly with an intermittent volatile energy mix that makes it extremely dependent on fossil fuel energies.
“In the worst periods when there is more demand and they’re more expensive.
That generates incredible tensions between different economies.”
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Chief market analyst Walid Koudmani at the financial brokerage XTB has also warned of a recession.
Mr Koudmani said: “We saw investors sell out of their pound sterling positions in reaction to the UK’s biggest interest rate hike in 27 years.
“The hike itself was widely expected but the moods of GBP investors dampened from the negative rhetoric from the Bank of England itself on the UK’s economic outlook.
“The UK central bank expects the UK economy to shrink in the final quarter of this year and suffer from a recession for all of 2023. This marks a stark turn in their projections.”