Record eurozone inflation: Which countries in Europe are being worst hit as energy prices soar?

·3-min read
Record eurozone inflation: Which countries in Europe are being worst hit as energy prices soar?

Inflation in the eurozone is continuing to soar to record highs, hitting 8.9 per cent in July.

That's up from 8.6 per cent in June, 8.1 per cent in May, and 7.4 per cent in April, as Europeans continue to see soaring energy and food prices fuelled in part by Russia’s war in Ukraine.

The preliminary estimate published on Friday July 29 by Eurostat, the European Union's statistical office, is the highest since recordkeeping for the eurozone began in 1997.

The steepest annual inflation rate in this estimate was once again for energy prices, at 39.7 per cent - down from 42 per cent in June.

That's followed by food, alcohol & tobacco (9.8 per cent, compared with 8.9 per cent in June), non-energy industrial goods (4.5 per cent, compared with 4.3 per cent in June) and services (3.7 per cent, compared with 3.4 per cent in June).

Every corner of the continent is facing rising prices, with Europe's expected economic bounceback from the coronavirus pandemic being hampered by a number of factors.

Outside of the EU, the UK’s inflation rate has surged to 9.4 per cent, its highest annual rate since 1982. Russia is facing inflation of 15.9 per cent, down from 17.1 per cent in May.

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, the European Central Bank raised interest rates for the first time in 11 years by a larger-than-expected amount, as it targets stubbornly high inflation.

The move, announced on July 21, raises new questions about whether the rush to make credit more expensive will plunge major economies into recession at the cost of easing prices for people spending more on food, fuel and everything in between.

This is expected to be followed by another increase in September.

In the July reporting, Germany saw its inflation rise to 8.5 per cent, after a small decrease last month.

France's inflation now stands at 6.8 per cent, and Italy's at 8.4 per cent.

Baltic countries remain especially affected, with Estonia experiencing inflation of 22.7 per cent, Lithuania 20.8 per cent, and Latvia 21 per cent.

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.

Russia has lately been the EU's top supplier of oil, natural gas, and coal, accounting for around a quarter of its energy.

An EU ban on coal from Russia is due to come into effect in August, and a voluntary effort is underway to reduce demand for Russian natural gas by two-thirds this year.

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.

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