The eurozone is heading for a recession and into a new economic reality where high inflation is no longer a temporary headache and seriously threatens to undo the gains of the post-pandemic recovery.
Inflation in March reached 7.5% on an annual basis, an all-time high for the EU economy.
Eurozone is heading for a recession
Many analysts are pointing to the Russian invasion of Ukraine, but the reality is that this crisis was already here before the war started.
It is a failure of the Eurozone. Big companies have sued this opportunity to turn on cheap price hikes, in return for profits not rising costs.
There is of course some attribution to rising costs, but that does not correlate to the increase in prices.
Inflation to a record 7.5%
The figure represents a stunning rise compared to one year ago when inflation was 1.3%, well below the 2% target of the European Central Bank.
The March data is the first reading from Eurostat that takes into account the consequences of the Ukraine war, which has now entered its second month with no resolution in sight.
Annual inflation – the rate at which prices for goods and services change over time – has been steadily rising since late summer, when a mismatch between supply and demand sent gas prices soaring.
It’s just Business – not social welfare
During the coronavirus pandemic, the European Central Bank (ECB) purchased corporate bonds worth almost €30 billion. This included the injection of over €7.6 billion into fossil fuels. (Green Peace data)
To clarify this was before the Eurozone was heading for a recession and whilst prices were at their lowest.
A breakdown of the ECB corporate bond purchases exposes that €4.4 billion went to utilities, such as Engie or EON. Over €3.2 billion, went to the oil and gas industry, with bonds purchased from Shell – one of the most polluting companies on earth – Total and Eni, among others.
So with the price increases, the ECB should make a healthy return, we must remember for the banks … It’s Just Business – not social welfare.
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