FX.co ★ News summary from the European Union: prices are rising rapidly, the trade deficit is increasing, and refugees continue to arrive

Annual inflation in 19 EU countries accelerated to 7.4% from 5.9% a month earlier, according to the final estimate of Eurostat. Analysts predicted that the indicator would remain at the level of the preliminary estimate – 7.5%. For comparison: last year, inflation in the EU countries was only 1.3% per annum.

In March of this year alone, consumer prices in the EU increased by 2.4%, and this is the final estimate. According to preliminary estimates, consumer price growth was at the level of 2.5%.

In addition, the EU countries are experiencing a trade deficit for the fourth consecutive month, which is due to an unprecedented increase in the cost of energy imports. According to the latest report from Eurostat, the uncorrected trade deficit in 19 countries where the euro is used amounted to €7.6 billion (or $8.2 billion). During the same period last year, there was a trade surplus of €23.6 billion. Import payments soared by 38.8% year-on-year, while export revenues rose by only 17.0%.

It is worth noting that the trade of the EU countries is extremely rare with a deficit, but now we are seeing it for the fourth consecutive month. The last time it lasted more than one month was in 2011.

According to data across the entire European Union, which includes 27 countries, the cost of energy imports in January and February more than doubled compared to last year. At the same time, imports of food and beverages, various raw materials, chemicals and cars have significantly increased.

The trade deficit of the European Union has increased significantly in the first two months since the beginning of this year with the energy supplier Russia – more than three times, to €25.2 billion. It also increased with Norway – from last year's €0.1 billion to €10.7 billion. The deficit has also almost doubled with China, to about €60 billion. The same can be said about India, Japan and South Korea. At the same time, the EU still maintains a trade surplus with the United States, Great Britain and Switzerland.

Among other things, European countries expect further difficulties due to migrants. Thus, according to recent UN estimates, about 5 million people have left Ukraine since the beginning of hostilities, that is, at least three times more than in 2015, when a flood of refugees from the Middle East poured into the European Union. Indigenous Europeans are clearly not enthusiastic about their new neighbors, and articles about the split in society are periodically published in the media, and the local government is subjected to rather harsh criticism. There were ideas about the adoption of migration reforms.

After the EU summit in 2018, Deutsche Welle published an article saying that there were no more countries in Europe that could continue the policy of open borders. And although at that time the critical point of the crisis was already over, since the number of illegal residents in the eurozone decreased by a multiple, the EU authorities hastened to increase the number of border guards by 10 times and close the sea routes. In addition to this, the eurozone countries began to pay neighboring countries to prevent refugees from entering the territory of the European Union. The UN has openly admitted that the migration crisis in Europe is the largest since the Second World War.

And now four years have passed since then. To date, in the light of the ongoing hostilities on the territory of Ukraine, the flow of new refugees is flooding the eurozone with renewed vigor. In France, the situation as a whole is far from critical. There are not so many refugees who have arrived and registered there – only tens of thousands for a country with a population of 65 million.

It is obvious that the main blow fell on Poland, neighboring Ukraine, on whose territory 2.5 million Ukrainians have arrived at the moment and are still there.

In Hungary, the influx of refugees is noticeably less than in Poland – only 470,000 people. Perhaps this is due to the fact that Hungarian is considered the most difficult language in Europe, besides, it is far from the richest country, therefore state support for those fleeing the war here will be small.

It is worth noting that many Ukrainian citizens go to Poland and Hungary in order to later emigrate further to Western Europe. Basically, everyone traditionally aspires to Germany. To date, local authorities have already counted at least 350,000 arrivals, and this number continues to grow. Germany's policy on this issue intends to be open. The government has already promised with confidence that it does not intend to limit this migration flow in any way.

However, cautious concerns about the consequences of the influx of refugees from Ukraine are already beginning to sound from experts. Thus, the head of the Swedish migration agency, Mikael Ribbenvik, publicly admitted that he was concerned that in light of the events taking place in the world, the European crisis of 2015 risked hitting the countries of the European bloc again. However, this time the consequences of this collapse may be too deplorable, because the EU economy after the pandemic and in the light of the growing energy crisis no longer has a powerful springboard.

Because of these sentiments, it is increasingly possible to hear experts' forecasts regarding the future of the euro. For example, the former director of Deutsche Bank, Thomas Mayer, said that the euro as a currency is losing its former greatness and is becoming increasingly unstable. The main culprits of this phenomenon may be prolonged inflation, an increasing trade deficit, and a new flow of refugees claiming social guarantees. And in the presence of all these problems, the European Central Bank continues to print new banknotes and does not announce measures to change the current situation.

According to Mayer, inflation in the EU will have not only economic, but also political and even social consequences. The economist cited hyperinflation in Germany in the early 20s of the last century as an example. The former head of Deutsche Bank expects that European citizens will start looking for a replacement for official money, and the era of the euro will end there.