Europe is still at risk of low growth and rising inflation, despite the ceasefire in Iran, the European Union's chief economic official said. This is reported by Bloomberg, writes UNN.
Details
"The long-term outlook remains clouded by deep uncertainty," EU Economy Commissioner Valdis Dombrovskis told the European Parliament's Economic and Monetary Affairs Committee on Thursday.
The European economy remains at risk of a stagflationary shock
The European Commission, the EU's executive body, plans to lower its GDP growth forecast and raise its inflation forecast for 2026 and 2027 due to the consequences of the war in Iran for the global economy.
Earlier this week, the US and Iran agreed to a two-week ceasefire to try to find a broader agreement to end the fighting. But this agreement remains fragile, leaving open the possibility of further escalation.
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Dombrovskis said the conflict could reduce EU economic growth by 0.4 percentage points this year if the war is short, and by 0.6 percentage points in 2026 and 2027 if the conflict drags on.
In the shorter scenario, inflation will rise by 1 percentage point this year, while in the more severe scenario, it could add up to 1.5 percentage points this year and next, Dombrovskis told EU lawmakers.
The Commission is helping EU countries develop support packages for businesses and households to limit budgetary losses, given that national treasuries have been burdened by the pandemic, the energy crisis, and the financing of the arms race.
It is important to remember that our room for maneuver here is more limited than before due to previous shocks
According to him, support measures "must be targeted, have a clear end date, and not increase the overall demand for oil and gas at a time when savings are needed."
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