Inflation In Eurozone and What Is Causing It?
About the Euro Area
Euro Area (Euro Zone), is an area in which 19 states from the European Union chose to replace their own national currency with a single currency. Since not all European Union Member States have taken a step to replace their currency, the ones that did are differentiated by saying they are from “Euro Zone” or “Euro Area.” Euro, a long-lasting goal of the European Union for decades, was first launched on January 1, 1991, in order to create a monetary and economic union among the EU States. In addition, only EU Member States are eligible to be a part of the euro area, although some states outside the EU have adopted the euro as their national currency with some exclusive monetary agreements with the EU. However, it should be noted that those states are not in the euro area, although they adopted the euro as their national currency.
What is the Euro Area’s Significance?
Euro Area’s primary objective is to maintain price stability, according to the European Central Bank (ECB). After its implementation, inflation had decreased in the Euro Area. And as it is an economic and monetary union, integrating economies within the eurozone along with foreign trade has significantly surpassed the states of the remaining European Union countries. It also designated the euro area as a destination for foreign investment because of the use of the euro. While it is a destination for foreign investment, the European Union’s internal market and the efficiency of the single market with the help of the euro should not be brushed aside as well along with other numerous factors such as low-interest rates and exchange-rate stability.
What is happening right now?
In September, the annual inflation rate in the Euro Zone is expected to jump to 3.4 percent after the 3.0% in August according to an estimate from the statistical office of the European Union (Eurostat), the highest level in 13 years compared to the 3.6 percent of 2008 Eurozone Debt Crisis. And to make a comparison to understand how dire the situation is: One of the requirements of the Maastricht Treaty from the European Central Bank (ECB) is to maintain the average eurozone inflation rate equal or less than 2 percent. Well, what is the cause of this? Energy prices. After already fluctuating prices, the energy sector recorded the highest annual increase of 15.4 percent, nearly eight times more compared to some other sectors. Adding the hindrances during production and shipping that took place in COVID-19 to the equation, things only exacerbated. For now, the European Central Bank remarks that even if the inflation stays higher for longer, the Bank will stick to dovish approaches towards the issue.
WORK CITED
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“History of the Euro.” Wikipedia, Wikimedia Foundation, 1 Oct. 2021, https://en.wikipedia.org/wiki/History_of_the_euro.
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“EU Divided over Response to Soaring, ‘Unbearable’ Energy Prices.” Euronews, 5 Oct. 2021, https://www.euronews.com/2021/10/04/europe-divided-over-response-to-soaring-unbearable-energy-prices.
Amaro, Silvia. “Euro Zone Inflation Hits Highest Level in 13 Years as Energy Prices Soar.” CNBC, CNBC, 1 Oct. 2021, https://www.cnbc.com/2021/10/01/euro-zone-inflation-hits-highest-level-in-13-years-as-energy-prices-soar.html.
Inflation Picks Up With Egypt’S Annual Headline Inflation Rate Rising To 6.1% In July Compared To 5.3% In The Previous Month. 2021, https://www.zillacapital.com/insights/inflation-picks-up-with-egypts-annual-headline-inflation-rate-rising-to-6-1-in-july-compared-to-5-3-in-the-previous-month/. Accessed 11 Oct 2021.
