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The Russian invasion of Ukraine has introduced the eurozone into a new economic reality where high inflation is no longer a temporary headache, but seriously threatens to undo the results of the post-pandemic recovery.
Inflation in March reached 7.5% compared to a year earlier, the highest level for the eurozone.
The figure represents a surprising increase in the conditions when the objective of the European Central Bank is not to exceed the level of 2%.
The March data is the first reading by Eurostat that takes into account the consequences of the war in Ukraine, which has already entered its second month without any solution on the horizon.
Annual inflation – the rate at which prices for goods and services fluctuate over time – has been steadily rising since the end of the summer, when a mismatch between supply and demand caused gas prices to rise.
The trend continued throughout the winter when low temperatures led to increased electricity consumption and deteriorated significantly after President Vladimir Putin ordered the invasion of Ukraine.
The war plunged the global economy, still powerless from the pandemic, into uncertainty and unrest. Wide range of Western sanctions end trade with Russia, EU’s main energy supplier
The block receives over 40% of its gas from Moscow, mainly through pipelines. Even if gas has so far been exempt from sanctions, the war has intensified price volatility across the continent.
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