EU news: Eurozone crisis as inflation soars past forecasts to ‘brutal’ new high | City & Business | Finance
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Inflation rose to 7.5 percent in March, up from 5.9 percent in February, according to statistics body Eurostat. Energy has continued to be the dominant driver with inflation in prices now at 44.7 percent compared to 32 percent the month before. Prices for food, alcohol and tobacco also increased as costs increasingly ripple down the supply chain. With Russia supplying 40 percent of Europe’s natural gas, energy prices have become highly volatile since the conflict began with recent threats from Putin to demand payment in rubles sending prices spiralling further. Russia is also a major exporter of metals and, along with Ukraine, grains are adding further pressure to food and manufacturing.
Across the bloc, the biggest jump was seen in the Netherlands where inflation rose 4.7 percent on the previous month – to reach 11.9 percent.
The Baltic states of Lithuania, Latvia and Estonia are also firmly in double digits.
Germany, meanwhile, has seen inflation soar to its highest levels since the 1980s – adding to fears over this year’s economic outlook.
Recession fears had already been sparked in Europe’s largest economy after central bank the Bundesbank warned of the possibility of a second quarter of negative growth this year.
Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, described the figures as “brutal”.
He said: “Energy inflation is a huge wildcard at this point.
“Europe is currently accelerating its attempt to rid itself of Russian gas and oil, a price-increasing exercise from the point of view of the domestic EZ economy.
“More recently, the stand-off with Moscow over whether to pay for Russian energy deliveries in euros, as per the current contract, or roubles, as demanded by Mr Putin, risks halting energy flows altogether.”
Speaking this week, ECB President Christine Lagarde acknowledged there was “no question” of higher inflation this year.
In a speech on Wednesday, she said: “The longer the war lasts, the higher the economic costs will be and the greater the likelihood we end up in more adverse scenarios.”
The ECB’s Vice President Luis de Guindos also expressed concern for the Eurozone’s outlook, saying: “In the second quarter of the year, my impression is that growth will be hovering (around) zero.”
Christopher Dembik, head of macro analysis at Saxo Bank, said: “Looking at the latest business surveys in euro area core countries (notably Germany), the risk of stagflation has incredibly increased over the past few months.”
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