Inflation Era: Ukraine Crisis Poses ‘Significant’ Dangers to Eurozone – ECB Head

There are difficult months ahead for Eurozone nations, with the head of Europe’s central bank warning that the ongoing Ukraine Crisis poses ‘significant’ dangers to the currency union.

‘Significant’ dangers to do with supply chain issues and the rising costs of food and energy are now facing the Eurozone, the head of the European Central Bank, Christine Lagarde, has warned.

These impending dangers can all reportedly be traced back to the ongoing war in Ukraine, with Russia’s invasion of the country creating a number of significant economic pressures which appear to be threatening Eurozone nation-states.

According to a report by POLITICO, Lagarde has listed the war itself, along with issues with global supply chains, the high price of food, and rising energy costs as three major factors threatening the bloc.

Food hikes are largely linked back to Ukraine’s major role internationally in the supply of wheat and fertilisers, while Russia’s prominence in supplying Europe with gas has led to significant instability issues within the continent’s energy sector.

“Europe is entering a difficult phase,” the ECB President said. “There is considerable uncertainty about how large these effects will be and how long they will last for.”

“At the same time, the war poses significant risks to growth,” the President also reportedly said while noting that citizens within the block seemed likely to pull back on discretionary spending due to the effects of the conflict.

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Lagarde’s warning comes as a number of individual states within the Euro currency block suffer significant increases in inflation.

For example, in Spain, the rate of consumer inflation rose to 9.8 per cent year-on-year in March, marking the highest level the country has ever seen since the introduction of the Euro.

“This development is due to generalised increases in most of its components,” Spain’s National Statistics Institute said, explaining the extreme rise. “These included increases in electricity prices, in fuels and oil prices, and in food and non-alcoholic beverages prices, higher this month than in March 2021.”

Ireland is also facing similar seismic rises, with inflation being predicted to top off at around 8.5 per cent in the coming months, though there is reportedly a risk that inflation could go beyond even this estimate.

However, even the conservative 8.5 per cent figure will result in significant hardships for Irish families, with real-term incomes likely to fall by 2 per cent, stripping the average household of €1,300 in spending power.

Germany is another country where experts are warning of serious economic consequences as a result of the various ongoing crises, with inflation now predicted to likely outstrip economic growth in the country.

This, however, is without factoring in the possibility that Russia could imminently cut Germany’s gas supply in its entirety as a result of the nation’s refusal to pay for the fuel in rubles.

“Germany is heavily dependent on Russian energy supplies,” one expert told Die Welt. “opping these deliveries carries the risk that the German economy will slip into a deeper recession and inflation will increase even more.”