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Inflation strengthens European dominance

At the Saku Brewery in Estonia, giant copper brewing kettles line up like plungers in a household sink kept on a shelf in a giant’s mansion. The brewery has been around for 200 years, but remember the company planned two price increases (10% each) in one year.

And even that double increase isn’t enough to cover the brewery’s skyrocketing costs, said Saku board member Jaan Harms.

“We are in an environment of accelerated inflation and, of course, energy is by far the main driver,” Harms said. He said the company’s gas bill will rise by 400% and his electricity bill will double his when the energy contract expires at the end of the summer. These costs are also rising as providers of all the products and services you purchase are also dealing with higher fuel prices.

The pressure is particularly acute in Estonia, where inflation topped 25% in August. But a steady rise in prices is being felt across Europe, according to estimates released Wednesday by the European Commission’s Statistics Office.

Consumer prices rose 9.1% in the 19 countries that use the euro as their currency, up from the previous record of 8.9% set in July. A year ago, this rate was just 3%. At the time, it was a warning level that reached a 10-year high, but now it can be welcomed with peace of mind.

Nine countries in the Eurozone recorded double-digit inflation. Lithuania and Latvia had more than 20%. France was one of the few countries whose price index fell to her 6.5%, the lowest in the group.

Inflation was largely driven by energy prices, which rose at an annual rate of 38.3%, largely due to Russia’s invasion of Ukraine, which previously supplied most of Europe’s natural gas.

The report, released a week before the European Central Bank’s scheduled meeting, could strengthen the view that interest rates need to be raised again to keep inflation in check, despite risks of a recession. .

At an economic summit near Jackson, Wyoming, last weekend, the bank’s board member Isabel Schnabel warned that inflation has persisted longer than expected, urging banks to act “vigorously.” said there is.

As a result of climate change, which has caused extreme weather events such as the coronavirus pandemic, the war in Ukraine, and widespread drought and wildfires, Schnabel said, “inflation volatility will exceed levels seen in the 1970s. is soaring,” he said.

Klaus Bistesen, chief eurozone economist at Pantheon Macroeconomics, said the comments were evidence that inflation was the bank’s main concern, “despite mounting evidence of slowing economic growth.” said.

The pinch spreads across continents. Last week, the UK’s energy regulator announced that home gas and electricity prices had nearly doubled in his October, making it difficult for millions of people to heat their homes this winter.

Inflation in the United States, one of the world’s largest energy producers, reached 8.5% in July.

Food and fuel prices are rising in Ahlada, a fishing village south of the Douro River in Porto, Portugal. Manuel Tavares returned from a night of fishing on a recent morning with nearly 200 pounds of his luggage. He spends an extra 20 to 30 euros ($20 to $30) a week on gasoline to power his small fishing boats.

But the price at daily auctions of his catch is even higher. Tavares, who has been fishing in these waters for his 42 years, said the species he brought are particularly prized in restaurants catering to tourists. Where once he sold bream for 8 euros a kilo, now he sells for 12 euros. Chivas are 14 or 15 euros per kilo, compared to 12.50 euros for him earlier. Lampreys are even more valuable.

“The fish pay for the fuel,” he said through an interpreter.

The sardines celebrated in a month-long festival in Portugal haven’t grown much. Tavares said sardine fishermen, who operate under restrictions to prevent overfishing, are also struggling.

In Portugal, annual inflation was 9.4% in August. At the beginning of the summer, Portugal and Spain brokered an agreement with the European Union to temporarily limit electricity prices to €40 per megawatt hour. A professor at the Institute for Advanced Study of Engenhalia in Lisbon and the University of Complutense in Madrid, he calculated that the price was 15-18% lower than without the cap.

Elsewhere in Europe, according to Norwegian consultancy Rystad Energy, electricity prices set a stunning record in August, with an average price of €547 per MWh.

Soaring costs are causing homes and businesses to look for savings. In Estonia, Saku Brewery stopped buying glass bottles from Russian suppliers after the war broke out in Ukraine. Since then, wholesale prices for bottles have risen by 20-80%.

As a result, the company had to quickly change its sales and marketing plans. Harms said it has stopped selling some products and halted all promotions for its biggest summer brand, Sak on Ice. “Simply because there are no bottles.”

Other bottled products are sold in cans instead.

To save on electricity bills, Saku installed solar panels on top of its warehouse and brewery this summer and now boasts the largest industrial rooftop solar park in the country. Also, he plans to turn the office thermostat down twice this winter.

The energy crisis has caused breweries to rethink a proposal they shelved as too costly: building a water treatment plant. Previous energy savings were not large enough to justify the cost. “But we’re thinking about doing this now because the rules of the game have changed so much,” Harms said.

Saku’s initial price hike passed, but so far there has been no drop in sales. Harms says summer vacation is at its peak, and people spend and drink when the weather is warm in this northern European country.

But like the rest of Europe, Estonia is gearing up for a dark winter.

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