The European Union finance ministers are meeting on Monday to discuss the recent surge in consumer prices. This surge has influenced many factors such as wages. The ministers are discussing the possible changes that they need to add to the rules of the bloc budget. This budget mainly supports local and international investments and reduces debt.
According to the data, the Inflation rate in the 19 countries sharing the euro has risen to 4.1% year-on-year in the previous months. This is while the inflation rate was 3.4% lower in September. The inflation rise is creating an inflationary spiral and a surge in wage growth.
A senior EU official that has been involved in the process of these meetings has stated that the inflation rises this year was expected but, the rate is increasing at a faster rate than we’ve been prepared for. He has added that this year we are witnessing levels of inflation we have not seen for a long time. By this, he is referring to the 4.1% inflation rate. He believes that this rate needs a discussion.
Contributing factors to the rising prices
The Officials have stated that the 23.5% jump in the energy prices influenced the October rate surge greatly. This rate will fall eventually; however, the pre-pandemic levels will most likely never come back.
The European Central Bank is the institution in charge of keeping the inflation rate at the 2% level, over the medium term. Philip Lane, the ECB chief economist, has emphasized the bank’s message that the current high price growth is only temporary. He has stated that that next year supply is expected to be more abundant and energy prices are also expected to either decline or stabilize at a certain rate. He has mentioned that the current period of inflation should not be considered as a chronic situation, since it is rather unusual and temporary.
In the upcoming meeting, the ministers are planning a reform of the EU’s budget rules. They are trying to bring the rules closer to the post-pandemic levels. This meeting also aims to fight climate change and support the growth and economic realities of high public debt and large investments.
The current rules require an annual public debt reduction rate that is simply undoable for most EU countries.
Southern EU countries are more in favor of debt reduction rules and giving special status to investment than northern states.