The worst risk to recovery

A week is ending, characterized by new historical electricity brands in the wholesale market . But the most worrying thing is the lack of any sign of correction.

 It is even possible to assure that the energy will maintain similar levels until spring. Several factors collude, among which two related to gas stand out. It is known that its demand is well above supply, which multiplies its price. But, in addition, the cold was more persistent than normal this year in Europe, which places the gas reserves of the Old Continent at a minimum, and leads its countries to go to the market and put even more pressure on demand. Seven extra months (at least) of record energy prices are capable of completely upsetting the ECB’s roadmap. What the Eurobank describes as a temporary rise in the CPI, which has already reached 3% in the euro area, mutates to become a problem of sustained high inflation over time. Criticisms are already emerging within the ECB towards President Lagarde’s intention of delaying any withdrawal of stimulus. But those plans will simply be unworkable if inflation is not corrected at a time when the hawk faction of the Bundesbank may strengthen after this month’s German elections. And there is still a greater risk than a quicker-than-expected withdrawal of monetary stimulus.

Seven more months of record energy prices will disrupt ECB plans and may lead to ‘stagflation’

The threat of stagflation in countries like Spain is stirring again. High prices can slow down household consumption and business activity to the point that GDP stagnates without the CPI stopping its rise. In this case, domestic demand would be further depressed, competitiveness would fall and, above all, the recovery would come to a standstill.

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Billy Marshall
Billy has worked as a journalist for various print-based magazines for more than 5 years. He is a science and space enthusiast who aims to excel in the field, especially in human anatomical studies. He curates and edits quality news pieces for The Croatia Times in the science & education genre.

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