There is widespread expectation that Mario Draghi, president of the European Central Bank, will initiate a fresh round of monetary stimulus. His actions would reflect growing concern that the trade conflict between the United States and China has negatively impacted the Eurozone. Specifically, European exports of manufactured goods have declined precipitously, particularly to China.

Three major centers in the developed world now face a downturn — China, the United States, and Europe. Because the European economy is heavily dependent upon trade, a slowdown in global markets hurts their economy. For years, Europe has suffered from low capital investment and stagnant productivity.

Angela Merkel, the German chancellor said: “I hope the trade talks between the U.S and China will make progress because it is obvious that the German exports are connected to these events.”

Many economists believe that Germany has slipped into a recession. More than any other advanced economy, Germany depends upon imports and exports. Economists at Bruegel, a Brussels-based research institute, estimate that Germany exports approximately $21,000 per capita in comparison to the United States at $6,800.

The EU’s biggest problem is that its economic model has aged alongside its population. Europe has many great companies but, unlike the US, none of them have been started in the past 25 years. In Europe’s golden age, Volkswagen rivaled Ford, and Siemens competed with General Electric. However, there is no European Google, Facebook or Amazon. In the emerging technologies, Europe has not produced native companies that are competitive with the U.S. in social media and artificial intelligence.

German industrial leaders including luxury auto maker Daimler AG and chemicals giant BASF SE have recently slashed their profit forecasts. They blamed weakening global demand and trade conflicts. Markus Schön, managing director of DVAM Asset Management, said he couldn’t recall a time when German companies issued so many disappointing profit warnings.

Many European companies are doubling down on exports given weakness closer to home. Stated differently, weakened domestic demand has forced companies to depend upon overseas sales.

Reuters reported the concerns of Allianz Chief Economic Advisor Mohamed El-Erian. He said: “I don’t believe this is the time for massive risk-on.’

He favored fixed-income securities within the three-to-four-year range. In looking at Europe, he said that five of the region’s biggest markets — Britain, Germany, France, Spain and Italy — are dealing with internal and continent-wide disagreements from Brexit to fiscal spending cuts that are toxic for growth.

Adding to Europe’s problems is the impending departure of Great Britain from the European Zone. Boris Johnson, Great Britain’s recently elevated prime minister, has assembled a team of Eurosceptic ministers to prepare for a tumultuous exit. Johnson is playing a dangerous game with his European counterparts. The International Monetary Fund predicted that if Britain leaves the Eurozone without trade agreements, its economy could decline by 3.5%. Because of Brexit uncertainty, British investment has lagged behind France, Germany, Italy, and Spain over the past few years.

France is the third biggest economy in Europe after Britain and Germany. It is the world’s sixth largest. Visitors to Paris can come away with the mistaken impression that the glitz of the French capital means the rest of the nation is just as well off.

French economic growth was stagnant for nearly a decade during Europe’s long-running debt crisis and had only recently begun to improve.

Italy’s Finance Minister, Giovanni Tria, summed up the problem:

“… We have to face the impact of Brexit, as well as several problems which originate from outside. … Europe in general is experiencing an economic slowdown. … We are facing the impact of uncertainties, and this is especially true for the more export-oriented EU member states, such as Germany and Italy …”

Originally published in the Sarasota Herald-Tribune