In your own words, what exactly is a recession?

Have Europeans entered into one already? It is not that simple to determine.

Everyone in Europe talks about the same thing: the economy is bad.

With Russia's war in Ukraine and the global energy crisis, there is a perfect storm that could lead to a deep and immediate recession. This casts a dark shadow over the whole continent.

In the past, a recession was defined as two consecutive quarters when the GDP shrank. But as the world economy has become more globalised and linked, the traditional definition has been shown to be too narrow and limited.

Grégory Claeys, a senior fellow at Bruegel, a Brussels-based think tank, says that focusing on GDP statistics is a simple, fast, and easy way to announce recessions. However, the method is too "systematic" and depends on numerical estimates, which can be changed at a later time.

Claeys told Euronews, "It takes time to call a recession." He also said that other important things should be taken into account, like industrial production, employment, and trade.

In fact, the United States' GDP fell in two quarters this year, but the government did not call those quarters a recession.

What's up? Other parts of the economy were doing fine. There were more jobs, wages were going up, and foreign investors kept pouring into the country.

Because of its location, the European Union is more likely to feel the effects of the Ukraine war and the disruptions in the energy market. However, the EU is showing a more mixed picture.

On the one hand, the number of people with jobs is still at an all-time high. There are still jobs available, and salaries have gone up at a faster rate than average.

On the other hand, there are signs that aren't good.

Consistently high energy prices have led to record-breaking inflation, which has put many households and businesses under a lot of financial stress that they can't handle. When winter comes, families may not have enough money to pay for energy, and businesses are scrambling to make ends meet and stay out of debt.

On the international level, the EU has been used to having trade surpluses for a long time. However, expensive energy imports are turning the balance of trade upside down.

From January to September, the bloc had a huge trade deficit of €266.6 billion. During the same time last year, the bloc had a surplus of €129.2 billion.

Together, these worrying trends and the uncertainty about the war in Ukraine have led financial institutions and economists to say that the EU will go into recession.

Claeys said, "This is a very unusual crisis because it's caused by the supply of goods, not the demand for them." In the past, recessions were caused by the demand for goods and caused problems in the labour market.

"It's also different from the COVID-19 crisis, which we knew would only last a short time because we knew we would find a solution in the end," he said, referring to the vaccines.

"This crisis is caused by Russia's blackmailing of energy supplies." It will have long-term effects that will force the EU to change its business model and think more strategically. "We can't buy our way out of this crisis."