European Union (EU) officials managed to avert a recession in the economy earlier this year, but now the region is threatened by a new recession. This is due to the large-scale costs of European governments to combat the high dependence on Russian gas supplies. informs Bloomberg agency.
“Eurozone core inflation excluding energy and food prices hit a record 5.6% in February and the European Central Bank looks set to raise rates to a record 4% to compensate. However, this strategy has risks. Without further tightening of monetary policy, a new vicious cycle of rising wages could begin.
At the same time, the ECB administration’s repeated increase in key interest rates is making the cost of loans higher than ever before. On a note, this means it will be more difficult for European governments to finance an economic aid program to guard against a worsening energy crisis.
“If a recession was avoided, it was not because of the perfect timing of central banks, but because governments went to great lengths to spend funds – close to $1 trillion – to protect households and make it easier to reverse Germany’s dependence on Russian gas. Repeating success in 2023 will not be easy. While borrowing costs are rising, spending is being delayed.”
13 February at the European Commission (EC) declarationHe said that the European Union (EU) economy has recovered from a recession and that the peak of inflation in the region has already passed. At the same time, core inflation continues to rise in EU countries and the cost of electricity remains high. For this reason, the EU predicts that the European Central Bank (ECB) will further tighten its credit policy.