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Friday, December 2, 2022

When faced with the prospect of inflation, European leaders shudder

WorldWhen faced with the prospect of inflation, European leaders shudder

This week, the elderly ladies pulled their canvas shopping carts to the fresh pasta counter at an outdoor market in Rome and lamented how the price of tagliatelle, oranges, napkins, energy bills, etc., had skyrocketed.

Simonetta Belardi, 69, a self-described communist, said that although inflation eroded her savings, it also weakened her sympathy for Ukraine in the conflict that many in Europe blame for the exorbitant expenses. She said that she was not a fan of Russia, but that the time had long since gone for a move from military backing for Ukraine to diplomatic discussions for peace. She said that an increasing number of individuals she knew in need of economic help were also losing their patience.

“All they want are weapons,” she remarked of Ukraine. “I’ve had enough of them.”

It is an attitude that transcends the shoppers in Rome’s piazzas and can be seen among the weekly rallies in Germany and the rising lines of French strikers: irritation, if not outright rage, at the war-fueled inflation. And this makes leaders anxious.

Despite the fact that Britain’s economic downturn was largely self-inflicted by unfunded tax proposals, Prime Minister Liz Truss’s resignation on Thursday sent perhaps the clearest signal yet that political peril awaits those who fail to address inflation and the erosion of living standards, regardless of the cause.

Perhaps the situation is much worse in continental Europe. In September, the annual inflation rate in the European Union increased from 3.6 percent to 10.9 percent, the highest level in decades.

This is far worse than in the United States or the United Kingdom, and it is primarily due to the bloc’s unique and agonising withdrawal pangs as it seeks to punish Vladimir V. Putin for his invasion of Ukraine by ending its long dependency on cheap Russian gas.

As winter approaches, Europe’s unified shift away from Russian energy is starting to take a toll on families across the continent, degrading living standards and threatening to fracture the single front for sanctions on Russia in some nations.

Mario Draghi, the retiring Italian prime minister and architect of the continent’s unified stance against Russia, warned that this would occur if Europe failed to strike an agreement to control the pricing of alternative gas imports.

In a September address to the United Nations, he said that spiralling energy prices will “threaten the economic recovery, restrict the purchasing power of households, and harm the productive capacities of firms.”

This time of social and labour unrest has not been seen since at least the 1970s, when strikes and demonstrations over the growing cost of living spread.

Kurt Vandaele, a senior researcher at the European Trade Union Institute, said, “We seen this after the First and Second World Wars, as well as in the 1970s.” There were strike waves coupled with an actual inflation surge.

There is pressure everywhere in Italy. Unions ask the government to spend more on energy subsidies to support businesses such as potters, who need to power their furnaces, as well as farmers, who are being penalised by the cost of fertilisers made with Russian gas or potassium.

This week, former Italian Prime Minister Giuseppe Conte, who has reinvented himself as a populist hero of the poor in southern Italy, stated that he would participate in a big rally on November 5 demanding peace for Ukraine and a halt to armament exports. According to critics, he advocates for Ukraine’s submission.

As everywhere, the next right-wing administration of Giorgia Meloni will have to grapple with how to soften the sting of inflation without adding to deficits that are already bloated. Mr. Draghi, a former head of the European Central Bank, has warned that a larger deficit would frighten foreign markets, increase interest rates, and harm Italians.

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