'Tis the season to be frugal in costly Europe

VALLETTA, Malta－Europeans are feeling the pinch as the increasing cost of living and rising energy prices bite, casting a shadow over Christmas.

Most families in Europe are tightening their budgets while focusing on covering essentials, and it is uncertain whether they will be willing to splurge more during a costlier festive season.

Retailers are concerned that inflation will further bite into consumer spending. The European economy is expected to encounter setbacks in its recovery as some countries introduce fresh measures to curb the fast spread of the Omicron variant of COVID-19.

"I have seen massive differences in the prices of groceries, and I am now spending almost double what I used to spend to feed my family every week," said Jade Sciberras, who works as a secretary for a company in Malta.

Prices have been increasing steadily since the beginning of this year, including the cost of water and electricity, said the mother of two.

Her experience is similar to that of Stefan Bilocca, a father of three. The 44-year-old engineer said that no matter how hard he and his wife try to cut down on extravagances like eating out, their salaries don't last till the end of the month.

Year-on-year inflation in the eurozone hit 4.9 percent in November, a record high, according to Eurostat, the statistical office of the European Union. Surging energy prices are largely to blame for the spike.

France recorded a 3.4 percent rise in inflation in November, its highest level in 13 years. Nor can Germany insulate itself from the soaring inflation as the figure last month surpassed the 5 percent threshold for the first time in three decades.

These effects have rippled through Britain even though it has left the EU.

"The impact of labor shortages, rising commodity prices and transportation costs have now very clearly taken their hold on consumer prices," said Helen Dickinson, chief executive of the British Retail Consortium, a trade association representing UK retailers.

The European Central Bank, or ECB, however, insisted that the steep rise in inflation should soon come to an end and is reluctant to increase its interest rate.

"We assume that in November the peak of inflation development has been reached and that inflation will gradually decline again in the coming year, in the direction of our inflation target of 2 percent," an executive board member of the bank, Isabel Schnabel, told German network ZDF.

Some economists, however, still expect interest rate rises in 2022.

"Inflationary pressure is likely to remain high in the coming year," said Gunther Schnabl, director of the Institute for Economic Policy at the University of Leipzig in Germany.

Supply chain disruption

In addition, disruptions to supply chains, labor shortages and high transportation costs have compounded the plight for retailers, presaging a gloomier Christmas.

Henry Cordina, owner of a grocery store in Malta, has been told by many of his customers that they will not be organizing large meals for friends and family this Christmas because of the safety guidelines put in place.

Christmas is traditionally a golden time for shopping and leisure activities, but there is little for Europeans to relish in the face of the rising costs and declining purchasing power. Businesses are worried that another wave of COVID-19 infections will dampen the economic rebound.

Some European countries including France and Britain have already announced new COVID-19 restrictions, which would possibly hurt their economic growth in the short term. Central banks in Europe remain hesitant about tightening monetary policies.

Oxford Economics said in a report that the rapid spread of the Omicron variant around the globe and the speedy reimposition of restrictions by governments underscore "the bumpiness and unpredictability of the path to normalcy".

"If Omicron becomes the dominant strain, causes more serious side effects, and reduces vaccine efficacy … global GDP growth next year could slow to 2.3 percent," the UK think tank predicts.

Xinhua