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Meeting this Monday, January 17 of the Ministers of Economy and Finance of the euro zone. A meeting that takes place in a context of inflation and faltering growth in Europe.
The means used to contain inflation will probably be at the center of the meeting of ministers. The rise in prices reached 5% in December over one year in the euro zone, unheard of for 25 years, therefore since the launch of the single currency.
The current high inflation stems from a rapid recovery in economic activity in the Eurozone, which led to sharp increases in fuel, gas and electricity prices. The energy component has thus contributed regarding half of the current inflation rate, underlined the President of the ECB, Christine Lagarde.
Prices for durable goods and some services have also soared as demand outstrips supply constrained by long-lasting shortages in the supply chain
The difficulty for economists is to know if the peak has already passed or if it is ahead of us. Some believe that it will remain permanently at higher levels than during the 2010s, in particular because of the cost of ecological transition. The European Central Bank ensures for its part that inflation is temporary. Christine Lagarde expects to see it lose force during this year.
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Slow growth
Besides inflation, growth is another thorn in the side of the euro zone. It might be slowed down at the start of the year by shortages, supply difficulties, but also by health restrictions linked to the new wave of the pandemic. This is the case of Germany. The European Union’s largest economy experienced disappointing economic growth in 2021, at 2.8%, precisely because of shortages of raw materials and components. Shortages that are expected to cost German industry some 100 billion euros in 2021 and 2022.
The automobile sector, queen branch of the first economy in the euro zone, is particularly suffering from the lack of semiconductors, which has forced manufacturers to cut production or even temporarily close factories.
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