So we all probably know that inflation is not over. Yes, maybe energy prices have decreased, leading to a decline in overall inflation numbers. However, the cost of food continues to rise, and that is what affects most people and their livelihoods the most.
But once again, we are witnessing a paradox that highlights the stark differences within the European Union and the remarkable resilience that keeps it together in its current state. Germany, Europe's largest economy, is experiencing an increase in its Consumer Price Index (CPI) and core CPI, which have reached 6.8%.
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The rise in inflation is not significant, but it is concerning to see it increasing again, especially for Germany. The country has been heavily impacted by Russian sanctions and the rise in natural gas prices. Some may argue that it's Germany's own fault for relying too much on Russian natural gas, which made them extremely dependent on it. Although things are changing now, it has not been without causing damage.
On the other hand, Spain is experiencing deflationary pressures, with inflation falling below the target of 2% set for all countries. Meanwhile, the European Central Bank (ECB) has planned two additional 0.25% interest rate hikes and has indicated that high rates will persist for a long time, possibly years. However, the ECB needs to approach Spain and Germany differently due to their contrasting problems. In the past, when Europe faced such divergent situations, the Eurozone nearly collapsed. This situation raises genuine concerns, and I'm curious to see how the ECB will navigate it. Will it favor mighty Germany, the "good kid" of the Eurozone, or Spain, one of the struggling countries in the south.