War fuels soaring prices in Europe


MILAN (AP) — Edoardo Ronzoni inspects a construction site near Milan that he closed in March as material costs soared. He can’t complete a half-built roundabout at an intersection known for its bumpers because asphalt, cast iron pipes and concrete are too expensive – prices exacerbated by Russia’s war in Ukraine.

Public works projects in Italy come to a halt just as the European Union injects 108 billion euros ($114 billion) in pandemic stimulus funds meant to kick off a building spree.

Ronzoni laments that his company has already lost its busiest three months and expects the worst: “We are afraid that we will not be able to work this year. We are closing all our sites.”

The war has accelerated inflation across Europe and around the world, with the prices of energy, materials and food rising at rates not seen in decades. This causes sticker shock at the grocery store, gas pumps, electric bills, and construction sites.

Soaring oil and gas prices are the main driver of inflation in Europe, which relies heavily on Russian energy for electricity generation and the power industry. Inflation is expected to reach almost 7% this year in the EU27 and contribute to slowing growth forecasts.

Fishmongers and farmers are forced to charge for their catches and harvests at prices they themselves consider astronomical. High fuel prices threaten to cripple ground freight transport. Bread prices soar from Poland to Belgium. Protests against price hikes have erupted in places like Bulgaria. While governments have responded with tax cuts and other aid, they face limits in mitigating the impact of energy market volatility.

Even stewards, with backyard hens, wonder if the price of the feed is worth the eggs they produce. Alina Czernik, a vendor in Warsaw, is doing the math, as she sees grain prices for her chicken rising by 150%, to 200 zlotys ($45) per 100 kilograms (220 pounds).

It spreads a sense of worthlessness, especially for low-income people.

“I’ve been a positive person, but so far I don’t see the light at the end of the tunnel,” said Eva Fuchsova, a mother of three who lives in the western town of Tuskov. the Czech Republic.

“I have to tighten my belt. I buy fruits and vegetables so that my children have everything, but I don’t touch them,” she said.

Economists call it a perfect storm, hitting as countries unleash spending to spur an economic rebound from the COVID-19 pandemic. Growing customer demand has overwhelmed factories, ports and freight stations, leading to shortages that have driven prices up.

Add to that: the war in Ukraine has blocked exports of raw materials such as steel and minerals that have driven Western Europe, as well as staples such as grain and seed oil, accentuating global shortages.

Inflation is particularly high in the Central and Eastern European countries closest to Ukraine’s battlefields. Prices in April rose by 14.2% in the Czech Republic, 12.3% in Poland and 10.8% in Greece. They are 61% in Turkey, which saw its currency lose 44% of its value against the dollar last year.

Store workers from Warsaw to Istanbul say customers are cutting back on spending, buying items at low prices, foregoing niceties like fresh-cut flowers and items they may be delaying, like new clothes.

In the Turkish capital, butcher Bayram Koza said he saw a 20% drop in sales after prices almost doubled, largely due to the cost of animal feed. This makes livestock farming unprofitable and many farmers sell out and move to town, he said.

“Even in (the affluent district of) Cankyaya, people no longer buy according to their needs, but according to what they can afford. Those who bought two kilos of ground beef are now buying a maximum of one kilo,” he said.

On the Greek island of Rhodes, Paris Parasos, owner of a fish restaurant, gets up at dawn to go fishing to cut costs. But he still had to raise prices at his restaurant in the island’s main town as cooking oil prices quadrupled. In addition, the cooking gas and electricity bills are three times higher.

“I could lower the quality and use the oil more, but I refuse to do that. We want customers to come back and expect the same quality,” Parasos said.

In Poland, bread prices rose 30%, sending shoppers back to discount outlets. Bakers in Belgium are laying off workers, as the price of a loaf rises 30 cents, to 2.70 euros ($2.85).

“I know bakers who work 13 or 14 hours a day to get by and honor their loans,” Albert Denoncin, president of the French-speaking Bakery Federation, told La Première radio. “We can do it for a while, but when I hear from World Bank management that it will last until 2024, we are not going to make it.”

In Spain, truckers got some relief on diesel prices thanks to government emergency measures, including a small discount and permission to pass on rising fuel costs to customers.

Yet the burden is high. Óscar Baños, who drives his own cargo trailer out of the central Spanish city of Palencia, said tires went from 400 to 500 euros, a new truck cab went from 100,000 to 120,000 euros and that a liter of diesel has gone from 1.20 to 1.90 euros over the past year. That’s the equivalent of a gallon of gasoline going from $4.80 to $7.60.

“There is a lot of uncertainty, not just in our sector but in all areas,” Baños said.

The European auto market is also facing price hikes as factory shutdowns in Ukraine, sanctions on Russia and a global shortage of semiconductors curb the supply of components needed to make cars.

As a result, average new car prices in Europe are expected to rise by $500 to $2,000 this year, according to Nishant Mishra, associate director of investment research at Acuity Knowledge Partners.

Back in Milan, the roundabout is just one of six sites Ronzoni has had to close in recent months. He finds himself unable to deliver the work at the contractual prices.

High costs mean companies are not bidding to undertake public works, including a bridge in Rome which was to be the first project built with EU stimulus funds. Money for infrastructure, worth almost half of the EU’s €220 billion, is at risk – along with the jobs it would bring, according to the ANCE National Association of Construction Workers.

The government has announced 3 billion euros to help cover rising prices, but manufacturers are not enough, with costs up 40% on average, but sometimes much higher. Iron prices, for example, have risen 170%, Ronzoni said.

“It’s exponential,” he said.


AP reporters Suzan Fraser in Ankara, Turkey; Monika Scislowska in Warsaw, Poland; Joseph Wilson in Barcelona, ​​Spain; Derek Gatopoulos in Athens; Karel Janicek in Prague; Kelvin Chan in London; Paul Wiseman in Washington; Samuel Petrequin in Brussels; and Veselin Toshkov in Sofia, Bulgaria, contributed.


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