When it is confirmed this November, the inflation in the eurozone for the month of October will have reached an historic first since the birth of the common currency: that is, the Eurostat calculations will show a double-digit figure, as they confirm that prices have risen by 10.7%. A percentage which is obviously unmanageable for the majority of household budgets that do not cover the cost of their shopping basket - in fact, if you look into the detail of the increases you can see that food, alcohol and tobacco went up by the higher total of 13.1%.
The European Central Bank's decision to increase interest rates to 2%, which may not be their last rise, also in line with the measures taken by the US Federal Reserve, aims to stop inflation from galloping off, but since things are not linear in the economy and in the end a 'communicating vessels' situation ends up occurring, we will have to wait and see what happens to the recession when the data for the last quarter of this year and the first quarter of 2023 are released.
We will see, then, if Christine Lagarde got the point right and the European Central Bank, in its eagerness to lower inflation and return to its standard target rate of 2%, does not provoke an even-graver economic decline. Its first measure to raise interest rates has caused an adjustment to the vast majority of mortgages because they are based on variable interest. This is, in many cases, leading to a review of conditions with banking institutions which, in practice, results in the requirement to continue making the monthly payment for longer.
The unfinished war in Ukraine has turned the world upside down and Russia has placed Europe - in particular - in an enormously complicated situation. On one hand, the increase in energy prices; on the other hand, the threat of gas cuts in several central European countries. Germany is suffering from this high instability and, consequently, so is the whole eurozone. Consumption is falling, the economy is contracting and the feeling of a society exhausted in the midst of its numerous conflicts increases pessimism. No one knows when the armed conflict will end, but it is clear that there is no end in sight.
Citizens are being asked to tighten their belts, to forget about recovering the cost of living that they have lost, when the public themselves see that the crisis does not affect everyone equally. Governments must be sensitive to the impoverishment of the middle classes and the rampant increase in poverty levels. It's not all macroeconomics when ample sectors of the population can't even eat.