The war unleashed by Russia in Eastern Europe is a jug of cold water for world, European and, of course, Spanish recovery. We are already seeing the first impact on the economy. Although in recent weeks investors have been preparing for the foreseeable
outbreak of war, and we have experienced a trickle of falls in the stock markets and a continuous rise in energy prices, the beginning of the invasion has provided certainty in the face of what until now were fears and the reaction has not been long in coming. The price of oil has exceeded 100 dollars per barrel, the futures on gas point to a rise of more than 30%,
and the price of electricity, far from moderating in the spring, as expected, will rise again.
Given these expectations, analysts have already begun to lower their growth forecasts. The Savings Banks Foundation, Funcas, points out that in this new scenario the Spanish economy will grow well below the 5.6% that the institution had forecast at the beginning of the year. And it is that the average annual inflation could be around 6%.
The economic sanctions that the European Union, the United Kingdom and the United States have already implemented against Russia and those that will be implemented in the coming days will do a lot of damage to its economy in the medium and long term, but they will also harm the EU. The CEOE warned this last Thursday in a statement: “We must not forget that it is the companies that will suffer the impact of these economic sanctions, including companies (also European and Spanish that trade and operate in Russia). In addition, and apart from this direct impact, energy and raw materials will become more expensive, raising the production costs of our companies, which will also affect the final prices that reach the consumer.
In this scenario, it is likely that the central banks will have to bring forward the rise in interest rates, slowing down the recovery, especially in the most indebted countries, such as Spain. The ECB's argument so far was that the rise in prices was temporary and that a tightening of monetary policy would have more negative than positive effects for the economy. But
the war in Ukraine any hope of temporary high inflation fades, and we must not forget that one of the mandates, if not the main one, of the central banks, is to guarantee price stability. And although in the countries of the South we are more accustomed to inflation, in Germany they are not and these high prices scare them enough to demand that the ECB fulfill its role and take measures to keep the CPI around 2%. .
Another of the doubts that arise with the
outbreak of war is whether the ambitious goals on the energy transition are not at risk. With these high electricity prices, the competitiveness of European companies is in danger and it is likely that they will have to relax, or extend the deadlines. If a few weeks ago we saw the
European Commission including gas and nuclear among green investments, today it is likely that these measures will not be enough to guarantee a price that does not hinder the activity of the companies. As the CEOE recalled on Thursday, "the European energy market is already facing unprecedented increases in energy prices and it is a priority for the EU to seek alternative sources of energy, raw materials and components." Europe needs more energy independence to stop being so vulnerable.