Europe faces stagflation: EU finance ministers discuss “economic nightmare”

At a meeting of European Union finance ministers in Cyprus, warnings were raised about an approaching “economic nightmare” for Europe and a drift toward stagflation amid the war in the Middle East. This was reported by Die Welt.

Eurogroup chief Kyriakos Pierrakakis said that Europe is facing “stagflationary pressure” — a scenario in which the economy nearly stops growing while prices continue to rise rapidly.

“June will be worse than May, July will be worse than June,” he warned.

European Central Bank President Christine Lagarde assessed the situation in similar terms: according to her, prices in Europe will remain high for some time, and a new energy shock is already beginning to drag on economic growth. Lagarde also criticized the large-scale support measures in EU countries, stating that assistance must be “temporary, targeted, and precisely calibrated.”

The updated European Commission forecast confirms the pessimistic assessments: the EU economy will grow by only 1.1% this year instead of the previously expected 1.4%, while inflation will reach 3.1% — one percentage point above earlier expectations.

The situation in the Strait of Hormuz is a source of particular concern within the EU. Due to threats to shipping, supplies of not only oil and gas but also fertilizers have been disrupted. Brussels fears further price increases for the agricultural sector.

If the blockade of the Strait of Hormuz continues, Europe’s gas reserves will begin to run out — storage facilities are one-third full.