EU news monthly May 2022

Politics

French President Emmanuel Macron defended his mandate in the second round of the presidential election with 58.55% of the vote. His opponent Marine Le Pen obtained 41.45%. Turnout was just under 72%.

The liberal green Freedom Movement won the parliamentary elections in Slovenia with 34.3% of the vote. The Slovenian Democratic Party of incumbent Prime Minister Janez Jansa came in second with 23.8%. The ruling group has already acknowledged the defeat, and Jansa, who heads the government of the country with 2.1 million inhabitants, will soon finish his term.

The Russian gas company Gazprom has completely stopped gas supplies to Poland and Bulgaria. It justified its decision by saying that local gas companies PGNiG and Bulgargaz refused to pay for gas in rubles, as Moscow demands.

Projections for Europe without Russian gas point to a problem by the end of January 2023 (according to Bruegel). In the event of a complete supply shutdown, EU countries would have to reduce annual consumption by 10 to 15%. At that time, even record high supplies from other countries would not be enough and gas storage facilities in Europe would be emptied at the turn of January and February 2023.

The European Central Bank has left its position (in April) on monetary policy essentially unchanged. The current data reinforces expectations that net asset purchases under the APP programme should end in the third quarter and that further monetary policy developments will depend on current data and assessments of the outlook.

Economy

In the first quarter of 2022, seasonally adjusted GDP increased by 0.4% in the EU, compared with the previous quarter. In the fourth quarter of 2021, GDP had grown by 0.5%. Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 5.2% in the EU in the first quarter of 2022. Portugal (+2.6%) recorded the highest increase compared to the previous quarter, followed by Austria (+2.5%). Declines were recorded in Sweden (-0.4%) and in Italy (-0.2%). The year-on-year growth rates were positive for all countries.

The year-on-year inflation rate in the EU rose to a record 7.8% in March from 6.2% in February. The highest inflation in the EU was recorded in Lithuania, where consumer prices increased by 15.6% year-on-year. Estonia came in second place with inflation at 14.8%. Malta, on the other hand, had the lowest inflation at 4.5%. It was followed by France and Portugal.

In the fourth quarter of 2021, the seasonally adjusted general government deficit to GDP ratio stood at 3.5% in the EU. The deficit to GDP ratio decreased due to stronger increases in total revenue compared to total expenditure as well as due to a higher GDP in comparison with the third quarter of 2021. In the EU, the deficit to GDP ratio remained stable compared with the third quarter of 2021. In the fourth quarter of 2021, most Member States continued to record a government deficit.

In the second half of 2021, average household electricity prices in the EU increased sharply compared with the same period of 2020 (€21.3 per 100 kWh), standing at €23.7 per 100 kWh. Average gas prices in the EU also increased compared with the same period of 2020 (€7.0 per 100 kWh) to €7.8 per 100 kWh in the second half of 2021. Household electricity prices rose in 25 EU Member States in the second half of 2021, compared with the second half of 2020. The largest increase (in national currencies) was registered in Estonia (+50%) and in Sweden (+49%). Between the second half of 2020 and 2nd half of 2021, gas prices increased in 20 of the 24 EU Member States. The largest increases in household gas prices (in national currencies), were observed in Bulgaria (+103%) and in Greece (+96%).

In the EU, household real consumption per capita decreased by 0.5% in the fourth quarter of 2021, after an increase of 4.2% in the previous quarter. At the same time, household real income per capita decreased by 1.8% in the fourth quarter of 2021, after an increase of 0.4% in the third quarter of 2021.

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