EU inflation set to fall by over 50% in 2025 - Brussels warns of imminent trade war!
The EU could see inflation rates fall by more than 50% next year amid a modest economic recovery and record low unemployment, the European Commission said in a forecast published on Friday.
The report, whose numbers were finalized in October, before US elections returned Donald Trump to power, warns that the bloc's open economy is "particularly vulnerable" to rising protectionism.
The news comes after a period of rising energy and food prices, partly caused by Russia's full invasion of Ukraine in 2022.
The high cost of living was at the forefront of voters' minds as they went to the polls in June, in an EU election that saw a significant increase in support for far-right parties.
But inflation will fall dramatically next year, with EU prices rising by just 2.4% in 2025, compared with 9.2% in 2022, bringing rates much closer to the European Central Bank's target of 2 % inflation for the euro area. EU unemployment "reached a new record low of 5.9%" in October, the report added.
Hit by the latest shocks, EU households are still prudently saving rather than spending, and the potential for further blowouts in global trade is still worrying Brussels officials.
"A further increase in protectionist measures by trading partners could disrupt global trade, weighing on the EU's highly open economy," the report warned.
This threat was further underlined by EU Economic Commissioner Paolo Gentiloni, who told reporters that "a potential protectionist turn in US policy would be extremely damaging to both economies", but that the bloc was "ready" to address any issue.
"Both regions maintain a common interest in maintaining high standards," he said, adding that economic integration "is a stabilizing economic and political force."
Trump won the Nov. 5 election on a promise to impose 10% tariffs on imports from countries such as the EU, but the Commission's projections only take into account policies announced and specified "in appropriate detail" by a deadline at the end of October.
The bloc's biggest economic reckoning is its largest member, Germany, whose growth will be the lowest in the EU in 2025 and the second lowest in 2026, at 0.7% and 1.3% respectively, the forecast predicted. a result set in weak domestic and foreign demand for manufactured goods and labor shortages plaguing the construction sector.
The sluggish performance of the German economy is accompanied by political turmoil, after the dramatic resignation of its liberal coalition partners, the FDP, led Socialist Chancellor Olaf Scholz to call early elections for February 2025.
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