Inflation in the eurozone is breaking records. Preliminary data on the consumer price index for May published today (Tuesday) show that it far exceeded the experts’ forecasts and stood at 8.1% in May (compared to May last year). Prior to the announcement, economists estimated that it would stand at 7.7%, and last month there was an increase to a level of 7.4%. Core inflation, which ignores energy and food prices, also rose beyond expectations to 3.8%.
In France, the price index rose to 5.8%, more than economists had predicted, and this is a record since the country began calculating inflation in its current form, in the early 1990s. At the same time, an estimate by the French authorities has surprisingly revealed that the economy has shrunk in the current quarter (compared to last year), which puts the country in a state of stagnation. French GDP has shrunk by 0.2%, compared to expert forecasts that it will remain unchanged. In Germany, where the consumer price index has climbed to 8.7%, this is a record of nearly 50 years.
It is not just energy prices that are responsible for inflation
In both countries, as well as in the eurozone as a whole, energy prices are mainly responsible for the jump, but food prices have also risen by close to 10%. Price increases were recorded in both commodities and services. Estonia leads the EU with inflation of about 20%, while Malta stands at the bottom with about 5.6%. The surge in prices has led European governments to announce in recent months a series of bailout and public assistance programs, which include grants, fuel and diesel subsidies, aid to the underprivileged and more.
The surprising figures increase the pressure on the European Central Bank, which has so far led a “ionic” policy relative to other central banks, to announce next Thursday at its monthly meeting an increase in interest rates. Bank president Christine Lagard has previously denied that inflation is a significant problem, saying the union’s situation is different from the situation in Britain or the US, two countries that have already raised interest rates in an attempt to cool the economy. And another beat later in the year, but voices are growing that require him to pursue more aggressive policies.