Due to the scenario within the Middle East, the European financial system “remains at risk of a stagflationary shock”, characterised by gradual progress and excessive inflation. This was said by EU Commissioner for Economy Valdis Dombrovskis throughout his speech to the Monetary Affairs Committee of the European Parliament.
The weight of the US-Iran disaster
The two-week ceasefire reached between the US and Iran «brings a much-needed discount in tensions, which can be mirrored within the power markets, with Brent crude oil now buying and selling beneath 100 {dollars} a barrel. However, the long-term prospects stay clouded by profound uncertainty”, underlines the Commissioner.
Estimates for 2026
The Commission estimates that EU growth for 2026 “could be around 0.2-0.4 percentage points lower than projected in the autumn economic forecasts, in the scenario of a short-lived disruption. In this case, inflation could be up to one percentage point higher,” explains Dombrovskis.
“If provide disruptions show to be extra substantial and long-lasting, the adverse penalties for progress can be even higher: progress may very well be 0.4-0.6 proportion factors decrease and inflation 1.1-1.5 proportion factors greater in each 2026 and 2027”, with “different elements” which “might additional amplify the adverse financial affect simply outlined”.
https://www.ilsole24ore.com/art/dombrovskis-economia-ue-rimane-rischio-shock-stagflazione-AIJ1jRPC