The Eurozone has seen its growth grind to a halt as a result of the ongoing Iran conflict, a new report from the Standard & Poor agency has found.<\/p>\n
April saw the end of the small incremental gains that economies within the currency union had been making, with data indicating that it is performing at a 17-month low.<\/p>\n
According to S&P, at the core of the drop is Europe\u2019s plummeting business activity, with its performance index putting it at a 62-month low \u2014 or one year into the COVID pandemic.<\/p>\n
The agency believes inflating energy costs are at the core of this negative shift, warning that the European Central Bank will likely struggle to tackle the issue with an interest rate hike without further damaging Eurozone economies.<\/p>\n
\u201cThe conflict has pushed the economy into decline in April, while driving inflation sharply higher. Increasingly widespread supply shortages meanwhile threaten to dampen growth further while adding more upward pressure to prices in the coming weeks,\u201d agency chief economist Chris Williamson said regarding the findings.<\/p>\n
\u201cIn this environment, the ECB once again has the unenviable task of deciding whether to raise interest rates in the face of the
worrying inflation picture, or whether this price spike will prove temporary and its focus should instead be on the need to prevent the economy sliding into a deeper downturn.\u201d<\/p>\n
\u201cWhile postponing any decision could make either scenario worse, it would be understandable to see rate setters sit on their hands and await more clarity on the situation, both in terms of the conflict and the assessment of the eurozone\u2019s economic health,\u201d he added.<\/p>\n
The report found that manufacturing over the month of April rose in the union, but added that this too likely represented businesses inside the union stocking up on supplies for fear the economic situation is about to get worse.<\/p>\n
\u201cInput costs and selling prices have already jumped higher not just in response to higher energy costs but in a reflection of a
broader upturn in commodity prices and mis-match of demand against constrained supply,\u201d Williamson warned.<\/p>\n
\u201cIf the COVID-19 pandemic is excluded, this is the biggest surge in cost pressures that we have recorded since 2000.\u201d<\/p>\n
News that the EU\u2019s currency zone is performing worse than expected comes two days into the bloc\u2019s \u201cDiversity Month\u201d, as well as one day after it announced it would be sending an additional \u20ac235 million in aid to sub-Saharan Africa.<\/p>\n
Justifying the decision, the Commission stated that wealth transfer was needed due to the harms caused by climate change in the region.<\/p>\n
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