We have become poorer Eurozone hammered by energy crisis as trade deficit soars to €10BN

David Lammy praises France’s response to energy crisis

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From November to December, the EU’s trade deficit, the difference between exports and imports, widened to €10billion (£838million). Figures from the European Commission pointed the blame at a surge in energy costs, as the bloc continues to rely on Russian gas.

Data from Eurostat said the EU’s value of imported goods jumped 41.8 percent from December 2020 to December 2021.

Year-on-year, the value of imports rose from €146.8billion (£123.1billion) in 2020 to €208.2billion (£174.5billion) in 2021.

Meanwhile, the bloc’s value of “extra-EU exports of goods in December 2021” was estimated to be €198.2billion (£166.2billion), for a rise of 12.5 percent from 2021.

As a result, Eurostat said the EU has recorded a €10billion (£838million) trade deficit in 2021, compared to a trade surplus in 2020 of €29.3billion (£24.5billion).

The Eurozone also saw the value of imports rise to 37 percent year-on-year in December 2021.

Imports to the euro area as of the end of 2021 were valued at €223.3billion (£187.2billion), with the rise mainly driven by an “increase in energy imports”.

However, export were valued at €218.7billion (£183.4billion), increasing by 14.1 percent compared to December 2020.

Eurostat also held the “highest increase for both import and export flow was recorded in the energy sector”, where the bloc record as 62.4 percent increase in extra-EU exports and 72.1 percent increase in extra-EU imports.

Throughout 2021, EU data says the bloc had a trade deficit of €276.7billion (£232billion) in just the energy sector.

It comes as the European Central Bank (ECB) warned of a potential €84bn (£70.4billion) blow to the region’s economy if its gas supplies are severed by a Russian invasion of Ukraine.

Russia sends an estimated 230 million cubic metres of gas to Europe every day, with around a third travelling west via Ukraine.

The ECB warned a 10 percent plunge to the eurozone’s gas supply would reduce economic output by 0.7 percent, equal to a €84billion (£70.4billion) hit, based on 2019 GDP figures.

Vanessa Gunnella at the ECB said: “The euro area is heavily dependent on imports of both petroleum-based energy products and natural gas.

“Higher gas – and electricity – prices reduce households’ real disposable income and purchasing power… and thus private consumption.”

Due to supply chain issues and spiralling energy costs, the ECB has raised its inflation expectations for 2022.

The Brussels-based institution said inflation will hit 3.5 percent in 2021, from a November forecast of 2.2 percent.

In a statement, the European Commission said inflationary pressures are likely to come down in 2023.

The commission estimated that annual inflation in the euro area will rise from 2.6 percent in 2021 to 3.5 percent in 2022, before then falling to 1.7 percent in 2023.

Meanwhile, inflation in the UK has hit a 30-year high of 5.5 percent according to the Office of National Statistics.

Consumer prices rose by 5.5 percent in the 12 months to January 2022, the highest since March 1992 when it stood at 7.1 percent.

The ONS said clothing and footwear, housing and household services, which includes energy bills, and furniture and household goods pushed inflation higher.

The Bank of England warned this month that consumer price inflation could peak at about 7.25 percent. by April due to the energy crisis.

It also comes as leading German economists have said “we have become poorer as a country” as the energy crisis causes havoc to Berlin.

Monika Schnitzer, Government economics adviser and Professor at the LMU Munich, told German outlet FOCUS Online: “The increased energy prices are currently mainly due to the increased prices for gas and oil imports.

“Since we have no influence on these prices and cannot do without imports in the short term, this means that we as a country have become poorer overall.

“For this reason, a one-time payment should be used in the short term to help those who are particularly in need.”

Michael Hüther, Director of the Cologne Institute for Economic Research also said: “In the short term, the expansion of renewable energies will not remedy the high prices. In the long term, however, this is where the key to lower energy prices lies.

“Against the background of the ecological transformation, planning and approval procedures in particular must be accelerated.

“The abolition of the EEG surcharge is long overdue and has been decided by the governing coalition.”

Additional reporting by Monika Pallenberg

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