The economic crisis in Europe will deepen the longer the Iran war continues and the Strait of Hormuz remains closed, Eurogroup President Kyriakos Pierrakakis warned on Friday during top-level discussions in Cyprus.
There is an "acute understanding" that if the strait does not reopen soon, "June will be worse than May, July will be worse than June," said Pierrakakis on the sidelines of a meeting with finance ministers in the Eurogroup in the Cypriot capital Nicosia. "We're closely monitoring the situation."
Europe's finance chiefs are on the one hand working to balance the need "to support our citizens, our societies, the most vulnerable," while on the other hand not allowing the energy crisis "to metastasize into a fiscal crisis," Pierrakakis told a press briefing.
Crude oil prices have skyrocketed since the Strait of Hormuz, which is vital for global trade, was blocked after US and Israeli strikes against Iran began on February 28. High energy prices continue to put a strain on businesses and consumers in Europe.
There is stagflationary pressure, but Europe is resilient and has already begun to respond to the crisis, said Pierrakakis.
Stagflation refers to an economic downturn accompanied by a significant rise in prices.
In its economic forecast presented on Thursday, the European Commission lowered its growth forecast from 1.4% to 1.1%.
For the 21 eurozone countries, it was reduced to 0.9%, and in the case of Germany, Europe's largest economy, the Brussels-based authority forecasts growth of only 0.6% in the current year.
