Inflation Tests Europeans’ Commitment to Sanctions Against Russia

Largely as a consequence of the Ukrainian War and the EU’s harsh sanctions against Russia, inflation has skyrocketed in Europe. According to a report published by Eurostat at the beginning of April, overall inflation in the Eurozone is up to 7.5%, a record high. Energy costs alone have risen by 44% from last year, while food prices have risen by 5%. Though support for Ukraine is widespread across Europe, many working and middle-class families are not sure how much longer they can bear the cost of sanctions. If EU member states want to remain firm with their sanctions against Russia, they must find long-term, effective strategies to combat inflation and become more energy self-sufficient. 

With stagnant wages and ever-increasing costs of essential items, many families are struggling to make ends meet. Patrick Philippe, a factory worker in France, told a WSJ reporter, “The price of fuel, bread, cooking oil, everything is increasing, except our salary.” Samira Tafat, whose husband is a taxi driver, said, “Our fuel budget is huge, it’s become unmanageable. I have three children, I need to feed them.” Mina Agib, a restaurant owner in Berlin, spoke to the Associated Press about skyrocketing prices from food suppliers: “We want to keep customers happy with high-quality ingredients and homemade food. But we also have to pay the prices our suppliers demand.” One customer wrote a negative review online after Agib was forced to raise his prices due to rising costs of food. 

Governments have taken different approaches to ease the financial burden of sanctions on average citizens. However, many of these solutions are unsustainable, short-term fixes if the war in Ukraine continues. According to the Wall Street Journal, the German government is sending a one-time €300 allowance to all people who pay taxes, along with a €100 child bonus to families. Though it may temporarily ease burdens, high prices will remain long after families have spent their €300. The government cannot sustainably continue subsidizing high energy and food prices.

President Macron of France has capped energy prices at a 4% rise. Unfortunately, this came at the expense of a major financial hit to EDF, France’s state-owned energy company that supplies power to 85% of the population, according to iNews. Macron has also cut taxes on electricity. 

Spain and Italy are both subsidizing gas prices, with Spain placing a price cap on rentals. Spain has experienced extensive social unrest as a result of inflation. Euroactiv reported that tens of thousands of people protested in Spain at the end of March over anger at stagnant wages and rampant inflation. In mid-March several truck drivers went on strike, leading to a food shortage in grocery stores across the country. Taxi drivers in Barcelona likewise protested by honking their horns for several hours on a central avenue. Fishermen, agricultural workers, and livestock farmers are also demonstrating after increases in fuel and animal feed became unruly. 

European governments are stuck in a difficult situation. As the war in Ukraine intensifies, the EU must continue to stand by its sanctions against Russia and condemn the horrific violence in Ukraine. Worryingly, sanctions have not proven powerful enough to stop or even slow down the war since it began in February. The war will likely continue for much of the year, fueling even greater inflation. Social unrest is already stirring over price hikes, and unless long-term solutions are implemented quickly, protests will shake Europe in the coming months. 

Europe’s most immediate challenge is to diversify its energy sources. The International Energy Agency has published ten comprehensive solutions for Europe to decrease its energy reliance on Russia in both the short-term and the long-term while continuing to meet its carbon emission goals. Solutions include the acceleration of projects to switch to carbon-neutral alternative energy sources, such as wind power, solar power, nuclear power, and bioenergy. This would require certain European states, particularly Germany, to bring nuclear power plants back online. The IEA also recommends Europe seek out new oil and energy suppliers, such as the United States, Norway, and Azerbaijan. 

The IEA also suggests how to make Europe more resistant to market changes. For example, Europe should introduce minimum gas storage obligations. Storing gas would dampen the impact of price strikes during market shocks or in times of geopolitical conflict. Improving energy efficiency in buildings, adjusting thermostats, and replacing gas boilers with heat pumps also provide long-term solutions to use less energy overall. European countries should discuss such solutions and share them with the public to quickly and efficiently reduce energy costs both in the short-term and long-term. 

Another important step in combating inflation is increasing wages. Wages across Europe, particularly for low-skilled workers, are not keeping up with inflation. Families are continually forced to cut things out of their budget. Unions, which are very strong in most European countries, should use their influence to demand wage increases for workers. French presidential candidate Marine Le Pen has advocated for giving companies tax incentives to raise salaries without raising prices. Though this will cost the French government significant revenue, it may be effective in increasing wages for workers struggling to keep up with inflation, reported France 24. 

Inflation stemming from the Ukrainian War has had severe effects on individuals and families across Europe, with inflation at a record high. Social unrest has already begun in Spain and will likely spread to other countries. If the EU and other European nations hope to maintain their harsh stance against Russia, they must immediately enact measures to ease the economic burden of sanctions on average people. This will begin with increased energy self-sufficiency and must also include market-based solutions to increase real wages. 

 

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