Inflation: why are prices rising in Europe?
The inflation rate in the Eurozone reached another record high in July, climbing to 8.9 percent. Commentators point to very different causes for this trend, from the war against Ukraine to the ECB's monetary policy and stock market speculation.
Putin factor differentiates Eurozone from US
Although the inflation rate is going down in the US Europe should not get its hopes up yet, warns De Tijd:
“It's good news that inflation can go down as well as up. In Europe too, families, businesses and governments are impatiently waiting for this to happen. But Europe must not draw too many conclusions from what is happening in the US. The inflation dynamics are different here. In Europe, the inflation is being driven far more than in the US by higher energy and food prices, which are largely a direct consequence of the war in Ukraine. So whether the inflation dragon continues to breathe its fire on Europe depends to a large extent on Russian President Vladimir Putin.”
A decade of misguided monetary policy
The war is only the trigger, not the cause, argue entrepreneur André Alvim and finance professor José Miguel Pinto dos Santos in Observador:
“The main cause of the inflation we are seeing in Europe is the ECB's monetary policy over the last decade. The trigger may have been the war-related problems, but even if the Russian invasion had not taken place, sooner or later another factor would have triggered the emerging inflation crisis. And if monetary policy had not been so actively lax in the past, the rising prices caused by the current problems with supply chains and commodity markets would only affect certain products and would be reversible, they would be not inflation.”
Speculation driving up food prices
Not supply shortages but speculation on the stock markets is to blame for the rising food prices, the NGO Grain comments in Le Courrier:
“Investors buy shares in funds with which they bet on the future prices of basic foodstuffs. This has an impact on current prices. This situation is well documented and known to governments. And it is similar to what happened during the food and financial crisis of 2007/2008. The problem is that the financial sector itself sabotages the efforts to regulate these funds in influential markets like the US and Europe. What's more, this kind of food speculation is also visible today on the Chinese stock exchanges.”
Lacking growth the biggest problem
Greece's revenues from tourism will be substantial this year, but the overall situation is still taking a toll on the country's economy, observes Documento:
“At the same time, the economy is suffering from higher inflation, higher deficits, higher public debt, low productivity and a sharper decline in citizens' purchasing power than the Eurozone average. The biggest problem is the low growth potential due to a lack of real productive investment in high tech and an ageing population. Another major problem is the growing inequality of incomes, which is determined both by government decisions and rising inflation.”
Subsidies not a silver bullet
At 6.5 percent, Malta's inflation rate is currently the lowest in the EU. But the government needs to change its strategy now, says The Times of Malta:
“The government has done the right thing in protecting families and businesses from the immediate impact of rising fuel, energy and food prices by subsidising imports of these essential materials. Still, subsidies are not a silver bullet. The time has come to get to grips with inflation in a more discriminatory way by adopting the best tactics to protect vulnerable households without putting at risk fiscal rectitude for too long.”