MONEY
Eurozone inflation is easing but remains painful. Which countries in Europe are being worst hit?
Price hikes in food and energy are among factors that are contributing to record inflation in Europe
Price hikes in food and energy are among factors that are contributing to record inflation in Europe – Copyright Canva
By Luke Hurst & Natalie Huet with AP • Updated: 30/11/2022 – 12:38
Inflation in the eurozone eased slightly in November for the first time since June 2021, but it remains in the double digits as rising food prices and high energy bills continue to squeeze budgets.
Annual inflation is expected to have reached 10 per cent in November, down from 10.6 per cent in October, according to the latest estimate of the EU’s statistics body Eurostat.
Driven by energy and food, inflation had reached an all-time high since November 2021 every month. The situation had worsened since the spring with market disruptions related to the war in Ukraine.
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The Baltic countries continue to be the hardest hit. Latvia, in particular, is experiencing the highest levels of inflation in the eurozone at 21.7 per cent in November, compared to 7.4 per cent a year ago.
In Estonia, inflation is further easing from a peak in August when it reached 25.2 per cent. It’s expected to be around 21.4 per cent in November, the same rate as in Lithuania.
The sharpest drop in inflation was in the Netherlands, where it eased to 11.2 per cent in November compared to 16.8 per cent in October.
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Elsewhere in Europe, inflation in the UK rose more than expected in October, reaching 11.1 per cent, its highest level since 1981. This compared to 10.1 per cent inflation in September, according to the Office for National Statistics.
The rise was mostly fuelled by soaring electricity and gas prices, up 24 per cent year-on-year despite a government cap, and by food prices, up 16.4 per cent.
Every corner of the continent is facing rising prices. Here is a look at the inflation rate in each country in Europe:
Following in the footsteps of its counterparts in other parts of the world, in July the European Central Bank (ECB) raised interest rates for the first time in 11 years by a larger-than-expected amount, as it targets stubbornly high inflation.
This was followed by another record rate hike in September, raising new questions about whether the rush to make credit more expensive and keep inflation in check will plunge major economies into recession.
On October 27, the ECB raised interest rates again, hiking its deposit rate by a further 75 basis points to 1.5 per cent – the highest rate in more than a decade.
On November 29, the president of the ECB, Christine Lagarde, warned that inflation in the eurozone had not peaked and risked rising even higher than predicted – fuelling expectations of further rate hikes.
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What’s causing these inflation rates?
Europe and much of the wider world were already being hit with soaring energy prices – which contribute to inflation – before Russia’s invasion of Ukraine in late February.
The conflict has exacerbated the energy crisis by fuelling global worries it may lead to an interruption of oil or natural gas supplies from Russia. Moscow said in September it would not fully resume its gas supplies to Europe until the West lifts its sanctions.
Russia typically supplies about 40 per cent of Europe’s natural gas.
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The prices of many commodities – crucially including food – have also been rising ever since COVID-19 pandemic lockdowns were first introduced two years ago, straining global supply chains, leaving crops to rot, and causing panic-buying in supermarkets.
The war in Ukraine again dramatically worsened the outlook, as Russia and Ukraine account for nearly a third of global wheat and barley, and two-thirds of the world’s exports of sunflower oil used for cooking. Ukraine is also the world’s fourth-biggest exporter of corn.
