Eurozone crisis deepens as inflation soars to a record high of 10.7% and economy slows sharply

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  • Inflation was in double digits in 11 of the 19 countries in the single currency area.
  • In Germany, consumer price inflation was 11.6%, in France – 7.1%, and in Italy – 12.8%.
  • Eurozone GDP grew by 0.2% in the third quarter, having increased by 0.8% in the second quarter.

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The crisis in the eurozone deepened as inflation hit record highs and the economy slowed sharply.

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Official data showed that inflation jumped to 10.7% last month – much worse than expected and rose from 9.9% in September.

In another blow came separate figures showing that the eurozone economy expanded by just 0.2% in the third quarter, up 0.8% over the previous three months.

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Eurozone inflation: Energy prices were the biggest driver of growth, climbing 41.9%

The double whammy underscored the magnitude of the challenge facing the European Central Bank (ECB) as it raises interest rates to bring inflation back under control without plunging the economy into recession.

Inflation was in double digits in 11 of the 19 countries in the single currency area, according to the official statistics agency Eurostat.

Energy prices were the biggest driver of the overall gain, climbing 41.9% as Vladimir Putin continues to cut off gas supplies to Western Europe.

Price cuts are slowing down economic growth, and experts fear the economy will shrink and fall into recession in the coming months.

However, with GDP still approaching the mark, some believe there is room for further sharp interest rate hikes as the ECB focuses on fighting inflation.

The ECB raised rates by 0.75 percentage points last week to the highest level since 2009.

He has raised rates by a total of two percentage points over the past three months and indicated that further increases could come as early as December.

Price cuts hinder economic growth in the eurozone

Price cuts hinder economic growth in the eurozone

Andrew Kenningham, Chief Economist for Europe at Capital Economics, said: “The increase in eurozone GDP in the third quarter does not change our view that the eurozone is on the verge of a recession. But with inflation soaring to over 10%, the ECB will prioritize price stability and keep raising rates no matter what.”

Christoph Weil, senior economist at Commerzbank, said: “The ECB’s goal of bringing inflation to just below 2% on a sustainable basis seems far off.”

The ECB is battling the biggest price spiral since the eurozone hit records in 1997.

Yesterday’s data showed that not only the sharp rise in gas and electricity prices caused runaway inflation, but the prices of food, alcohol and tobacco rose by 13.1%.

Even if these volatile factors are excluded, the “core” inflation rate continues to rise, reaching 5%.

In Germany, consumer price inflation was 11.6%, in France – 7.1%, and in Italy – 12.8%. Price increases are a concern worldwide, but are more noticeable in Europe.

Credit: www.thisismoney.co.uk /

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