A few steps down to destroy WTO

These days sanctions and retaliation  is a hot topic. The first round is over and we will likely observe escalation well supported by political rhetoric.  In the long run, the system of world trade falls with acceleration.  The problem is not the current ping-pong with billions lost. The root problem is the political coup de grace to the overall trust and confidence between business agents.  It is not clear how to behave and calculate risks if the level of loss is out of control.

Dark ages knock the door - claims in WTO will increase in number and volume. It is not excluded that WTO will be paralyzed in a few months.

Will EU sanctions produce recession in ... EU?

When calculating the outcome of sanctions political leaders focus on some simple figures of immediate loss for both sides. The problem is that they ignore real economic forces underlying the reaction of complex economies to any major disturbance.  The first response of the country imposing sanctions might seem minor when expressed in Euro, but it makes not only immediate harm but changes business risks throughout the whole economy. The new profile of economic risks affect financial system by increasing risk premium and slowing  business. The whole economic system, especially in the years of slow recovery, might sink into another recession period before reaching a stable growth path. Political elites feel this possibility, which is dangerous for them in terms of troubles for elections, and likely react wrongly by new sanctions mainly supporting the emotional side of punishment. A new round of sanction will likely increase the level of economic and financial risks exponentially. The only benefit is that the country under sanctions will suffer more.

As in boxing, the heavy-weight winner is always in bruises and own blood. But who cares when brain is damaged