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Inflation in the Mediterranean: a second outbreak of fever


Written by Gérard Tur on Thursday, March 31st 2022 à 16:10 | Read 188 times


Inflation is spreading across the Mediterranean as a result of a poorly controlled economic recovery. The war in Ukraine is currently generating a second acceleration which should be strongly amplified by the summer.


The European Central Bank is unable to curb inflation. Photo ECB
The European Central Bank is unable to curb inflation. Photo ECB
MEDITERRANEAN. Inflation continues to rise in the Mediterranean countries. Initially fuelled by the strong economic recovery of the last few months and the shortage of basic products (energy, food, etc.), it is experiencing a new surge. This "second wave" has its source in the war unleashed by Vladimir Putin. Russian or Ukrainian cereals no longer supply the markets, and the sanctions taken by the West against Russia are causing tensions in many sectors.

In France, inflation rose by one point in one month to reach +4.5% in March (over twelve months) according to INSEE. A performance compared to other southern European countries! The situation in Spain is indeed much worse with a price increase of 9.8%. Greece is barely better with +7.2% in February (+6.2% in January). The Greek parliament's financial committee has announced double-digit inflation, probably before the summer. Italy's inflation rate was only 6.7%. Oil and gas prices rose by 52.9% in the same period.

Food is becoming a luxury. Photo FD
Food is becoming a luxury. Photo FD

Risk of social unrest

In the south and on the eve of Ramadan, inflation is causing fears of food riots https://en.econostrum.info/Egypt-seeks-further-IMF-support-to-underpin-its-comprehensive-economic-programme_a1330.html. Morocco had an inflation rate of 3.3% in February. A rate which, here as in the whole Mediterranean basin, should rise by at least one to two points in the very short term. In Algeria and Egypt, inflation is close to 10%. Egypt is undoubtedly one of the Mediterranean countries most dependent on Russia and Ukraine. But everywhere the rates given do not reflect the experience of the population. Because the basic necessities of life, food and energy, are literally soaring. In Egypt, for example, prices have risen by 18% for food and 50% for unsubsidised bread.
 
Countries already suffering from hyperinflation are seeing their situation worsen still further. For example, Turkey https://en.econostrum.info/Turkey-sets-new-inflation-record-close-to-50--in-January-2022_a1262.html had a rate of 54.4% in February 2022. Meat recorded a sharp 48% increase on 21 March 2022. Lebanon suffers from staggering rates: 224.39% in December 2021, 239.69% in January, 214.56% in February (still on a rolling 12-month basis). Prices have increased more than fivefold in one year in the transport, health, restaurant and hotel sectors.

Inflation is forcing many central banks to raise their key interest rates, making credit more expensive and threatening the economic recovery. At the same time, the interest rates of the most indebted countries or those considered fragile are rising. This is the case for Portugal, Italy and Spain. However, only low rates, and even negative rates for countries like France, make public debt bearable and repayable.



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