According to a new forecast by the European Commission, the economic growth of member states may be only 2.7% amid the conflict in Ukraine and the consequences of international sanctions against Russia. Back in February, the target was +4%. The forecast for the bloc's largest economy, Germany, dropped from +3.6% to +1.6%. The conflict in Ukraine has created "new difficulties at a time when the Union has begun to recover from the pandemic," the European Commission said. In addition, average inflation in the Eurozone is expected to be 6.1 percent.
Economists point out that against this background, it is becoming increasingly likely to end years of soft monetary policy and increase the refinancing rate by the European Central Bank in the summer, which is now at a historic low of 0%. This could put pressure on the stock market. The main goal of the central bank is to achieve price stability, but the current situation is very difficult, as the EU economy risks stagflation (a combination of rising inflation and a stagnant economy).
