PARIS – Rising prices and food prices driven by Russia’s escalating violence against Ukraine led to a sharp rise in prices in Europe last month at an unprecedented level in 40 years, with prices in 19 euro-based countries rising 7.5 percent, according to released Friday with European statistics. organization.
Unprecedented inflation was the latest sign of Ukraine’s growing economic crisis in Europe, forcing the European Central Bank to raise interest rates, perhaps before the end. year.
“Prices have come up even more than we expected,” Joachim Nagel, President of the German Bundesbank, said on Twitter. “Financial investment should not give up the opportunity to deal with its time.”
The rise in electricity prices has posed a serious threat, which in turn has led to higher costs for European businesses and families and reduced the European economic boom due to the Covid-19 epidemic. Electricity prices have risen by about 45 percent in March since last year, as the crisis has pushed up the price of gas, electricity and oil prices.
Europe and the United States are making significant efforts to reduce reliance on Russia’s ability to address European economic risks and security. Last week, the United States agreed to increase natural gas exports to help Europe break away from Russia.
Germany, Russia’s largest energy exporter in Europe, also wants to halve Russian oil and coal this year, ending its dependence on Russian natural gas by mid-2024. Europe’s largest economy, Germany, is already suffering. Financial losses from crisis. The German Council of Economic Experts, which advises the government in Berlin, this week reduced its projected growth in 2022 by half, to 1.8 percent.
Adding to Europe’s economic woes is rising food prices, as wheat, corn, and barley are left behind in Russia and Ukraine, which in turn produce more of the crop for global use.
Prices for unprocessed food went up by an annual rate of 7.8 percent last month, Eurostat said. Since the war, wheat prices worldwide have risen by 21 percent, barley 33 percent and other 40 percent fertilizer, threatening the food crisis.
Even without food and energy, inflation in the eurozone continued to rise as inflation and jobs continued to grow.
The largest increase was recorded in Lithuania (15.6 percent), Estonia (14.8 percent) and the Netherlands (11.9 percent). Consumer prices in Germany rose 7.6 percent compared to last year, and 9.8 percent in Spain.
On Wednesday, the president of the central bank, Christine Lagarde, said he expected food and energy prices in the eurozone to remain at a high level, allowing the region not to fall into the trap of rising prices and stagnant growth. The bank has recently announced that it intends to reduce other forms of incentive to buy bonds.
But experts say more pain is coming, as the war continues to fall in price and energy prices are returning to the economy. The Kremlin’s threat to rid Russia of oil and gas in Europe unless payments are made in rubles has raised the price of high-energy electricity.
Russia-Ukraine War and Global Economy
Claus Vistesen, chief economist of the eurozone at Pantheon Macroeconomics, said in letters to clients that if Russia cut gas to Europe, prices would rise, even though Moscow could not do so. A ceasefire agreement between Russia and Ukraine, if possible, could bring down electricity prices.
But governments around Europe are not taking advantage of it, promising billions of euros to protect businesses and families from the pain of rising electricity bills that have damaged consumer purchasing power.
“Families are becoming less optimistic and can reduce spending,” she said. Lagarde speaking in Cyprus Wednesday. “The longer the war lasts, the higher the economy and the higher the risk.”
Denmark is investing 2 billion Danish Crowns ($ 299 million) to use “heat monitoring” for more than 400,000 families in need. France is raising 4 percent electricity costs and is spending $ 26 billion to help companies and households save more gas and electricity.
In Germany, where the war in Ukraine and rising inflation have also caused depression, Chancellor Olaf Scholz’s government has approved € 4.5 billion in tax revenue.
The war has added to the pressure on the chains already unraveled by the epidemic, continuing to impose manufacturers’ prices and commodity prices on consumers.
“The question is whether the worst is behind us now, and it seems unlikely,” Bert Colijn, chief economist at eurozone at ING Bank, wrote in a letter to clients, adding that the prospect of a two-pronged rise “could not be met at this time.”