Amid soaring inflation in the Euro area, the European Central Bank (ECB) raised interest rates. This is the first time since 2011 that interest rates have been increased.

In June, the annual inflation in the Euro area stood at 8.6 per cent, up from 8.1 per cent in May, driven by high energy prices, followed by food, alcohol and tobacco. Many now fear that the continent could slip into a recession owing to the high energy prices and shortage.

“We expect inflation to remain undesirably high for some time, owing to continued pressures from energy and food prices, and pipeline pressures in the pricing chain,” Christine Lagarde, President, ECB.

According to CNN, Europe's economy, which accounts for almost a fifth of the world's output, is facing its toughest test since the pandemic erupted more than two years ago. “Like the United States and other developed economies, Europe is dealing with red-hot inflation that's hurting consumers, potentially hastening the end of the post-lockdown spending boom,” it said.

Consider this. Germany, EU’s largest economy, registered a trade deficit for the first time in more than 30 years.

Amid acute energy shortage, the International Energy Agency has prescribed the need to maximise gas supplies from other sources; accelerate the deployment of solar and wind; make the most of existing low emissions energy sources, such as renewables and nuclear; ramp up energy efficiency measures in homes and businesses; and take steps to save energy by turning down the thermostat.

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