(Erste Bank Research Team)
Lagarde, confirmed plans to increase interest rates in the eurozone by 25 basis points
On 1 July 2022, Czechia took over the presidency of the Council of the EU. During its presidency, the Czech Republic will focus on five closely linked priority areas: Managing the refugee crisis and Ukraine’s post-war recovery; Energy security; Strengthening Europe’s defence capabilities and cyberspace security; Strategic resilience of the European economy; Resilience of democratic institutions.
At a summit meeting of its leaders, the EU approved the introduction of the European common currency in Croatia. Croatia will become the twentieth member of the eurozone in January of next year.
Ukraine and Moldova are now candidates for membership in the EU. The granting of candidate status was approved by the presidents and prime ministers of the EU countries. Georgia was promised that it can become a candidate as well if it fulfils certain conditions established by the European Commission.
The EU and New Zealand completed negotiations for a trade agreement. It is expected that thanks to the agreement, bilateral trade will increase by 30% and that yearly exports from the EU will increase by 4.5 billion euros. Investment from the EU into New Zealand could potentially grow by 80%. The customs duties paid by EU companies are expected to decrease by about 140 million euros in the first year after the agreement comes into effect.
Turkey has given its approval for the entry of Finland and Sweden into NATO. Their entry must also be approved by the parliaments of all thirty of the existing NATO members.
At the end of June, the head of the European Central Bank, Christine Lagarde, confirmed plans to increase interest rates in the eurozone by 25 basis points. She also said that the Bank is prepared to take even more radical steps if inflation cannot be brought under control.
In the first quarter of 2022, seasonally adjusted GDP increased by 0.7% in the EU compared with the previous quarter. Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 5.6%. Ireland (+10.8%) recorded the highest increase of GDP compared to the previous quarter, followed by Romania (+5.2%). Decreases were observed in Sweden (-0.8%), France (-0.2%) and Denmark (-0.1%).
The EU annual inflation was 8.8% in May 2022, up from 8.1% in April. A year earlier, the rate was 2.3%. The lowest annual rates were registered in France and Malta (both 5.8%). The highest annual rates were recorded in Estonia (20.1%) and Lithuania (18.5%). In May, the highest contribution to the annual euro area inflation rate came from energy (+3.87 percentage points, pp), followed by food, alcohol & tobacco (+1.59 pp).
The EU unemployment rate was 6.1% in May 2022, stable compared with April 2022 and down from 7.3% in May 2021.
In the first quarter of 2022, the hourly labour costs rose by 4.2 % in the EU, compared with the same quarter of the previous year. In the EU, hourly labour cost grew by 3.4% in the (mainly) non-business economy and by 4.5% in the business economy: +3.8% in industry, +3.8% in construction and +4.9% in services.
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