The latest data released by the EU Statistics Bureau on January 5th reveals a slight increase in the Eurozone’s inflation rate for December 2023. The month’s inflation, calculated on an annual basis, stood at 2.9%, surpassing the previous month’s 2.4%.
According to data from the German Federal Statistical Office released on January 4th, Germany, known as the “economic locomotive” of Europe, experienced a year-on-year inflation growth of 3.8% in December. In the same month, Germany’s energy prices also increased by 4.1% compared to the previous year.
Meanwhile, several European countries, including the UK and Spain, are witnessing widespread strikes amid inflationary pressures, economic stagnation, and increasing labor unrest. The deep-seated reasons behind the economic challenges in Europe and its current energy dilemma are under scrutiny.
“They Deserve Better Treatment”
Governments in multiple European countries previously cut subsidies for natural gas, electricity, and food, triggering an acceleration in inflation. Recent data indicates the hardships and lack of growth momentum in the European economy. The Eurozone’s Composite Purchasing Managers’ Index (PMI), released earlier, has been contracting for consecutive months.
Data from the EU Statistics Bureau shows that the Eurozone’s economic growth has remained stagnant since the fourth quarter of 2022. The latest report from the EU Commission has revised down the economic growth expectations for the EU and the Eurozone in the new year from 1.4% and 1.3% to 1.3% and 1.2%, respectively.
Philip Lausberg, a policy analyst at the European Policy Center, suggests that due to significant inflationary pressures in the Eurozone, the risk of upward inflation will be a crucial factor for the European Central Bank’s decision-making. With the current inflation rate in the Eurozone still above the ECB’s target of 2%, a near-term possibility of interest rate cuts seems unlikely.
Amid sustained high inflation, multiple industries in countries like Belgium, Italy, the UK, Germany, and Spain are experiencing large-scale strikes, impacting sectors such as retail, services, catering, healthcare, and transportation.
The common demand among striking workers from various industries is to increase income to cope with the burdens of high inflation.
At the end of last year, Amazon workers in various parts of Europe went on strike.
“They deserve better treatment than what they are getting now,” said Stuart Richards, a UK organizer of the strikes. He highlighted that the wages of Amazon workers in Europe are lower than their counterparts and have consistently lagged behind inflation since 2018. Richards emphasized that they should receive decent compensation from the profitable company.
At the beginning of 2024, due to the breakdown of labor negotiations, employees of Spain’s Iberia Airlines initiated a four-day strike, affecting over 8,000 staff, with more than 400 flights canceled and over 45,000 passengers directly impacted.
Primary doctors in the English region of the UK held strikes in late 2023 and early 2024, with the latest strike starting at 7 am on January 3rd and lasting for six days. If the planned strike continues, it will be the longest in the history of the UK’s National Health Service.
The six-day strike by primary doctors will pose multiple healthcare challenges for tens of thousands of patients in the UK.
The British Medical Association still hopes for the UK government to resume negotiations with a “credible” attitude, which could lead to an early end to the strike.
The key demand of these healthcare workers on strike is a salary increase to improve their living and working conditions.
Who Set the Energy Trap?
European media widely believe that the soaring energy prices in Europe are a major factor driving inflation. The current economic predicament in Europe also faces the impact of geopolitical crises.
Since the outbreak of the Ukraine crisis, Europe has followed the US in imposing sanctions on Russia, leading to a backfire effect. As Europe gradually “decouples” from Russian oil and gas, it faces a significant energy supply gap. Meanwhile, the US continues to increase exports of liquefied natural gas (LNG) and other energy resources to Europe.
According to foreign media reports, the US may become the world’s largest exporter of LNG in 2023, with Europe being a major importer of US LNG.
In fact, as early as 2022, French President Macron publicly accused the US of employing double standards in selling natural gas.
German Vice Chancellor and Minister for Economic Affairs and Climate Protection, Habeck, also hinted that some countries, including the US, are charging “astronomical figures” for natural gas fees to Germany. Furthermore, some natural gas suppliers are benefiting from the impact of the Russia-Ukraine conflict.
Natural gas is not the only concern; the same applies to crude oil.
According to data from the EU Statistics Bureau, the US surpassed Russia in 2022 to become the largest supplier of crude oil to the EU.
Europe, which has long hoped to achieve diversified energy supply, has ended up becoming the recipient of expensive energy from the US.
Now, as the new round of conflict between Israel and Palestine continues for nearly three months, the tense situation in the Middle East will potentially impact Europe’s economy through the oil and gas market.
Cui Hongjian, a professor at the Institute of Regional and Global Governance at Beijing Foreign Studies University, analyzes that against the backdrop of the Russia-Ukraine conflict, several countries in the Middle East could have been a reliable alternative energy source for Europe. Countries like Germany have signed long-term oil and gas supply contracts with Qatar, Egypt, and others. However, if the Israel-Palestine conflict further escalates and spreads, it will affect the security of Europe’s energy supply.
As the European economy enters the new year amid stagnation, facing exploitation from ally the US, and influenced by multiple factors, the outlook for Europe in 2024 seems far from optimistic.