EU records highest level of inflation since euro introduction: 96.5 million people at risk of poverty

In an opinion adopted at the July plenary, the European Economic and Social Committee (EESC) highlighted the heavy impact of high prices on the EU's economy and called on national governments to implement measures to help vulnerable families and essential sectors.

Inflation in the European Union is at its highest since the euro was introduced. Currently, 96.5 million Europeans are at risk of poverty and social exclusion: these citizens are the most affected by a broad increase in the prices of goods and services, rising energy costs and loss of purchasing power.

Bankruptcy declarations in the EU have reached the highest level ever recorded. According to a Eurostat index, the level of bankruptcy in the EU is now 113.1 compared to the benchmark of 100 in 2015.

In a recent Eurobarometer survey, 41% of respondents said that prices, inflation and the cost of living were among the biggest problems facing their country, ahead of health (32%) and the economic situation (19%).

These are just some of the alarming figures revealed in the EESC opinion drafted by Felipe Medina Martín and adopted at the July plenary session.

Keeping inflation under control

The impact of the energy crisis on the European economy is serious. The high prices of energy, raw materials, services and industrial goods have resulted in high inflation and weakened economic growth, and have put strong pressure on public finances and businesses, undermining external economic competitiveness.

Many companies from essential sectors (agri-food, transport, retail, etc.) have shown resilience and kept providing services and products to European consumers, but the situation is not easy: inflation is persisting, production costs have increased and supply chains are being reorganised.

To reverse this trend, the EESC points out that households and key sectors should benefit from plans to reduce the impact of high energy prices, and calls on the European institutions to establish control mechanisms. Future policies should be tailored, targeted and transition-proof, and support families with lower incomes and greater difficulties in particular.

Some national price control measures have turned out to be the most suitable measure to soften the effects of high prices of basic products on families' budgets. For example, the so-called "Iberian exception" on the electricity market price system, has allowed Spain and Portugal to cap the price of gas in electricity production plants and thus drastically reduce bills. The temporary reduction of VAT on electricity prices, food and fuel adopted in some Member States is another example.

Lowering energy consumption

The EESC urges governments to encourage businesses and households to implement energy saving and efficiency measures that will permanently reduce energy demand.

To this end, the EU should reduce its dependence on fossil fuels, reform the electricity market and beef up investment in renewable energy, for example by introducing an "investment golden rule", enabling the necessary public expenditure to be made.

On this matter, the EESC is in favour of pressing forward with the changes proposed under REPowerEU to streamline and accelerate the granting of permits for installing renewable energy infrastructure.

Businesses can play a key role in the energy transition and in the EU's renewable energy targets for 2030. Many companies are investing to reduce energy consumption and improve their capacity to access more renewable energy. They can act as accelerators in the electrification of transport and replace gas in heating.

The EU should take advantage of the current situation to speed up the decarbonisation of the EU economy, said Mr Medina Martín. It is time to make the necessary investments in Europe's energy transition, to reduce dependence on fossil fuels..