Greece’s annual inflation rate soared by 7.2% in February compared to 6.2% in January, which has accelerated a trend that has followed the COVID-19 pandemic and now the Russia-Ukraine conflict, official statistical data released Thursday indicates.
The surge in consumer prices was driven by the price of electricity and fuel, especially gasoline, which has grown astronomically over the past year.
Data shows Greek inflation driving electricity prices higher by an astronomical 71.4% in February, with natural gas leading all other forms of energy with a 78.5% rise. Fuels and lubricants rose by 23.2%, and heating oil rose by 41.5%.
Inflation in Greece fueled by Russia-Ukraine conflict
On a monthly basis, the consumer price index rose by 1.1%, the Hellenic Statistical Authority (ELSTAT) said.
The increases are fueled by the Russia-Ukraine conflict, with the cost of Russian energy and Ukrainian grain dramatically spiking. Businesses and households continue to face a massive wave of price increases, with the government struggling to reel them in.
The Greek government set an inflation target in its 2022 budget for 1% but it’s clear that is unachievable, with Greek Finance Minister Christos Staikouras estimating it will now be set at 4%.
Higher inflation, which makes it more expensive for people to buy everything from food to fuel, has been one factor holding back Europe’s recovery.
European economy threatened by inflation
The issue of price rise and energy supplies dominated the European Central Bank’s Governing Council’s meeting on monetary policy in Frankfurt on Thursday.
In February, the annual inflation rate in the Euro Area rose to a record high of 5.8%, up from 5.1% in January. This was primarily driven by high energy prices, with more than 40% of Europe’s total energy requirements sourced from Russia.
Last year, at the same time, the inflation rate stood at a mere 0.9%.
On Tuesday, the US announced its own ban on Russian oil, but experts warned that such measures would have a severe impact on the European nations as well.
“Already struggling with rising living costs, Europeans now face an even deeper hit to their livelihoods as the conflict in Ukraine pushes fuel and food prices higher and threatens to undermine a fragile economic recovery,” Reuters reported.
European countries are now looking at reducing their dependence on Russia for energy requirements, but measures to boost renewables will not yield results immediately.
“It would be foolish to deny that sanctions will affect our economy but the impact of the sanctions are being felt across the world, especially as oil prices have surged,” Anna Koroleva, a senior journalist at Expert, said in an interview with India Narrative. “As a retaliation mechanism if Russia too turns off gas supply to Europe, they will not like it very much.”
Challenges have already started to show up due to supply chain disruptions following the sanctions. While this has also led to inflationary pressures especially in Europe, concerns are rising over a delay in economic recovery.
As part of the sanctions announced by the EU and allies, some Russian banks have been disconnected from the SWIFT international payment system, choking Moscow’s financial payment mechanism thereby affecting cross-border trade.
Crude oil, refined petroleum, wheat, gold, and coal are among Russia’s top export items. In 2020, Russia exported goods worth $335.5 billion across the globe.
Greece offers subsidies to combat inflation
In January, Greece extended financial relief offered to businesses and households due to the rising energy costs.
Greek Prime Minister Kyriakos Mitsotakis announced that the government will allocate $452 million, covering a significant part of the increases in electricity bills, in January alone.
“For another month the government will support households, farmers, and businesses in the face of the global energy turmoil,” Mitsotakis said.
In September, Greece offered a power bill subsidy of $10 a month for the first 300 hours consumed in the month. That was increased to nearly $20 in October, to $42 in November, and to $55 in December.
The total cost of last year’s relief was estimated at nearly $150 billion, and it will be funded by revenues from the country’s carbon emissions trading mechanism.
Rising inflation hits the US
Rising inflation also hit the US where it recorded a 40-year high, with the consumer price index in February rising 7.9% higher compared to a year earlier, The New York Times reported.
John P. Calamos, Sr., one of the most prominent financial experts worldwide, said that rising inflation in the US causes market volatility.
Rising inflation is a “reflection of what has been happening with fiscal policy, more regulations and the cut-down of the oil supply,” Calamos, Sr. said in an interview with Greek Reporter. “We have to remember we had the lowest interest rates in decades, forever almost… The biggest part of inflation was due to energy, oil.”