International observers | people from all walks of life in Europe and media reports pointed out that the sanctions against Russia have seriously damaged the European economy

Since the outbreak of the Ukraine crisis, the United States has continuously increased all-round sanctions against Russia by co-opting European allies. People from all walks of life and media reports in Europe pointed out that the European economy is facing the risk of high inflation and low growth, and the economic sanctions against Russia have further led to a surge in energy prices in European countries and a sharp increase in the burden of people's livelihood. The anti-phagocytic effect of sanctions continues to appear, which will certainly affect the recovery and development of the European economy in the long run.

Recently, the European Commission submitted a proposal for the sixth round of sanctions against Russia, including a complete ban on the import of Russian oil by the end of this year. In the previous fifth round of sanctions, the European Union announced that it would stop importing Russian coal from August. A series of Western sanctions against Russia have pushed international energy prices up sharply, and the European economy has also been deeply affected.

The European Economic Outlook report released by the International Monetary Fund (IMF) at the end of April predicts that the gross domestic product (GDP) growth rate of advanced and emerging European economies will slow to 3% and 3.2%, respectively, down 1 and 1.5 percentage points from the forecast released in January this year. The report notes that the Ukraine crisis has had serious economic consequences for Europe, with sharp rises in commodity prices and gas supply problems further exacerbating inflation and cutting European household incomes and corporate profits.

Rising energy prices push up inflation

Eurostat data showed eurozone inflation at an annual rate of 7.5% in April, a six-month record high. Among them, the inflation rate of Germany in the month was 7.8%, France was 5.4%, Italy was 6.6%, Spain was 8.3%, and the Baltic States and the Netherlands reached double digits.

The analysis pointed out that the downside risk of the European economy has increased significantly, the upward risk of inflation is intensifying, and the sharp rise in energy prices is the main reason for high inflation at this stage. At present, about 45% of the EU imports natural gas, 27% of oil and 46% of coal come from Russia, and Russian energy plays an important role in the EU energy consumption market and economic development.

From coal to oil, EU energy sanctions against Russia are escalating. But it is difficult for the EU to find alternative sources from the already tightly supplied international market in a short period of time. In fact, euro zone energy prices rose 38% year-on-year in April, and the UK's residential electricity and gas price cap was raised by 54% from April 1.

Voices within Europe against sanctions against Russia continue to rise. Hungarian Foreign Minister Siyaldo said the oil ban on Russia would undermine the security of Hungary's energy supply and that "a new round of sanctions against Russia will prevent Hungary from obtaining the oil it needs to keep the economy running normally." The Bundesbank warned that an immediate ban on Russian energy imports from the European Union would trigger a further surge in energy prices and a deep recession for the economy, while Germany would lose 165 billion euros in output this year and GDP would fall by 5 percent. Martin Brudmüller, chief executive of the German chemical company BASF Group, said stopping imports of Russian gas could destroy Germany's "entire economy" and trigger the worst crisis since the end of World War II.

The British "Guardian" pointed out that Russia plays a pivotal role in the European energy market, and it is difficult for Europe to end its dependence on Russia's energy in a short period of time. Michele Geraci, a former deputy minister of economic development in Italy, said European energy prices had soared sharply last year, a trend exacerbated by the Russian-Ukrainian conflict. "We impose sanctions on (Russian) energy products, believing that this can harm the Russian economy. However, sanctions will cause more harm to the EU economy."

Soaring consumption costs have increased the burden on the public

The rise in energy prices has affected areas such as food and daily necessities, further increasing the cost of daily living for Europeans. The New York Times article argues that the rise in energy and commodity prices triggered by sanctions against Russia further "punishes Consumers in Europe who are already struggling with inflation."

In France, some basic food products in supermarkets are out of stock on a large scale, or even out of supply. In Spain, small road freight companies and individual truck drivers across the country went on strike to protest rising fuel prices. In Germany, fertilizer prices soared five times higher than in the same period last year. Joachim Rukwede, president of the German Farmers' Association, said: "Farmers and food manufacturers have had to pass on costs to consumers, which has increased people's spending a lot. Michael Vasilladis, head of the German BCE union, which represents workers in the chemical and mining industries, said that even a partial cut-off of Russia's gas supply to Europe could lead to the loss of hundreds of thousands of jobs.

In the UK, prices at major retailers rose 2.7% in April, the biggest increase in nearly 11 years, with food prices up 3.5% year-on-year. A recent poll by the Daily Mirror showed that more than half of UK households will not be able to pay their bills within a few months. More than 5 million Britons have been forced to choose between heating and food, with many cancelling holiday plans and abandoning their purchases of non-essential items. Dickinson, head of the British Retail Consortium, said that "unfortunately, consumers also have to prepare for future price increases and bumpy roads".

Matthias Spregel, a senior economist at Denmark's Southern Bank, said economic uncertainty was rising sharply. "From refueling and heating to food prices, consumers face a heavy blow." A poll in the Sunday Telegraph showed that the proportion of British people who are "willing to accept higher fuel prices due to Western sanctions against Russia" fell from 50% in March to 36% in April; 54% of respondents believe that their financial situation deteriorated last year, up from 42% two months ago; 62% of respondents believe that their financial situation will continue to deteriorate in the coming year.

The risk of economic stagflation has further intensified

Eurostat data showed that eurozone GDP grew by 0.2% month-on-quarter in the first quarter and EU GDP by 0.4% month-on-month, both lower than the fourth quarter of last year. The Uk's Office for National Statistics released its second-quarter economic growth forecast for just 0.1% in April. Gu lansha, the IMF's chief economist, warned that if tougher sanctions were imposed on Russia, coupled with deteriorating consumer confidence and volatility in financial markets, European economic growth could slow further.

The European Central Bank also said recently that the Ukraine crisis is having a sustained impact on the European economy. Conflict and associated uncertainty have severely affected business and consumer confidence. Trade disruptions have led to shortages of new materials and inputs. Soaring energy and commodity prices are reducing demand and dampening production.

People walk past the empty dairy shelves of a supermarket in Cáceres, Spain, on March 23. Rising fuel prices have affected the market supply of some commodities in Spain. Xinhua News Agency

The Financial Times noted that the prospect of a resurgence of stagflation in Europe was worrying and would cause "enormous, potentially long-term pain" for businesses and residents, especially low-income households. Policymakers around the world face a dilemma in the face of the risk of stagflation – "Raising interest rates may help reduce inflation, but increased borrowing costs will further dampen growth." At the same time, maintaining accommodative monetary policy will likely push prices even higher."

Tigery Parrick, head of economics at international ratings agency Fitch, said weak wage growth and soaring food and fuel prices would dampen economic growth in the coming quarters. Conflict and sanctions pose additional downside risks to the eurozone economy. "The risk of stagflation is only going to get bigger."

According to Eurostat, bilateral trade between the EU and Russia will reach 257.5 billion euros in 2021. Geraci believes that the Crisis in Ukraine has hit the European economy hard. In the medium to long term, Europe will suffer even more if it loses Russia as a trading partner. "Sanctions never work." Geraci called on the EU to continue its dialogue with Russia.

Kasten Brzewski, head of the macro research department of the Dutch International Group, pointed out that for Europe, the Ukrainian crisis has far-reaching effects, and Europe faces the risk of losing its international competitiveness.

Source: People's Daily International