Inflation, the great tax of the poor, does not let up in the eurozone. Prices are running wild in the year of the invasion of Ukraine by Russia and the energy crisis at cruising speed. According to preliminary data from Eurostat, year-on-year inflation is already at 8.6% year-on-year in June, never seen before in the history of the eurozone. The figure has exceeded the expectations of analysts, who expected it to be around 8.3% or 8.4%. 8.6% is half a point more than the interannual rate for May.
On July 21, the governing council of the European Central Bank (ECB) meets in Frankfurt to make history. For the first time in 11 years, Christine Lagarde, the president, and her team of governors, will raise interest rates. An increase of 25 points is announced, but it could be more. The discourse that inflation was exogenous, temporary and transitory has changed. Now, the theses of those who ask to act forcefully are imposed not only with the increase in the price of money, but with the drainage of liquidity. Leaving aside the energy crisis caused by the war, denying the inflationary effects of ultra-expansive monetary policy is already impossible.
The underlying trend with prices is very clear because, aside from energy, the rise in core inflation -which is what most worries experts because it is more structural- is already at 4.6%. In this case, it is also above expectations. They are two tenths more than in May and 1.7 points more than last February. Yes, at the beginning of the year, before the effects of the war were felt, core inflation in the eurozone was already at a worrying 2.9%. The ECB’s target is 2% and the benchmark, medium-term expectations…
In the case of Spain, which released its advance inflation data on Wednesday and is at 10.2%, the differential with the eurozone increases, which makes the economy less competitive. Spain is penalized by the way of calculating the price of energy in the CPI, because here only the free market is taken into account, while in Europe it is the other way around. In addition, in the poorest countries, the weight of food – which is rising a lot now – is greater in the shopping basket and that contributes to further triggering inflation.
According to the community statistical office, the unstoppable rise in prices in the eurozone in the sixth month of 2022 responded to the 41.9% year-on-year rise in energy prices, which accelerated from 39.1% in May, while that the increase in the price of fresh food in June was 11.1% year-on-year, when in May it had been 9%. In turn, services became more expensive by 3.4% year-on-year, one tenth less than the previous month, while the prices of non-energy industrial goods rose by 4.3%, compared to 4.2% in May.
The largest price increases in the eurozone were registered in Estonia (22%), Lithuania (20.5%) and Latvia (19%), while the least strong increases corresponded to Malta (6.1%), France ( 6.5%) and Finland (8.1%). In addition to the three Baltic countries, six other eurozone members posted double-digit price increases, including Slovakia (+12.5%); Greece (12%); Slovenia (10.8%); Belgium (10.5%); Luxembourg (10.3%); and Spain (10.2%), while the Netherlands (9.9%); Ireland (9.6%); Cyprus (9.1%); and Portugal (9%) registered rates of at least 9%.
