“The risk of a recession is increasing.” This was acknowledged by European Commissioner for the Economy Paolo Gentiloni on Wednesday. He warns of what could become “one of the toughest winters in generations”.
Gentiloni described the economic situation during a speech at the Bruegel Research Center in Brussels, “a number of warning lights in the red: energy prices have broken new records, inflation continues to rise, economic confidence is deteriorating. The Russian war continues.”
Evolution of energy markets
Gas prices were fifteen times higher at the end of August than they were before the Corona pandemic, and two times higher than they were at the beginning of this summer. “The prospects depend mainly on the development of energy markets: they will obviously deteriorate compared to our reference scenario in the event of a complete disruption of Russian gas supplies,” Gentiloni warned. Energy also remains the driver of inflation, which is now around 9.1 percent in the eurozone.
The Commission had to adjust its economic growth forecast for the eurozone before. In mid-July, it expected the eurozone economy to grow by 2.6 percent this year, and only 1.4 percent in 2023. In May, the Commission had forecast 2.7 and 2.3 percent, respectively.
Not everything is gloomy
However, not everything is gloomy, according to Gentiloni. With a growth of 0.8 and 0.7 percent, the eurozone economy performed better than expected in the first two quarters of this year, and unemployment rates remained at historic lows. In addition, oil and food prices are deteriorating and supply chain problems are receding. “These developments will ease inflationary pressures, so inflation may have peaked,” he concluded.
See also: Paul Dehor – “We’ll Feel Inflated in Everything”
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