MILAN (AP) — Edoardo Ronzoni inspects a construction site near Milan that he shut down in March as materials costs skyrocketed. He can’t finish a half-finished roundabout at an intersection known for its fender benders, because asphalt, cast-iron pipes and concrete are too expensive — prices exacerbated by the Russian war in Ukraine.
Public works projects in Italy grind to a halt as European Union injects 108 billion euros ($114 billion) in pandemic recovery money meant to start a building frenzy.
Ronzoni regrets that his company has already lost its busiest three months and expects the worst to come: “We fear we won’t be able to work this year. We are closing all our sites.”
The war has accelerated inflation in Europe and the worldof prices for energymaterials and food rising at speeds not seen in decades. It causes sticker shock at the supermarket, gas pumps, electricity bills and construction sites.
Rising oil and gas prices are the main driver of inflation in Europe, which is heavy dependent on Russian energy to generate electricity and power industry. Inflation is projected to be close to 7% this year in the EU with 27 countries, contributing to: slowing growth forecasts†
Fishmongers and farmers are forced to levy prices for their catch and crops which even they consider astronomical. High fuel prices threaten to paralyze freight transport over land. Bread prices are skyrocketing from Poland to Belgium. Protests against price increases have erupted in places like Bulgaria. As governments have responded with tax cuts and other aid, they face: limits in mitigating the impact of volatile energy markets†
Even the frugal, with backyard chickens, wonder if the price of feed is worth the eggs they yield. Alina Czernik, a shop assistant in Warsaw, calculates as she sees grain prices for her chicken rise 150% to 200 zloty ($45) per 100 kilograms (220 pounds).
It spreads a sense of futility, especially for low-income people.
“I’ve been a positive person, but for now I don’t see the light at the end of the tunnel,” said Eva Fuchsova, a mother of three who lives in the city of Touskov in the western Czech Republic.
“I have to tighten my belt. I buy fruits and vegetables so my kids have everything, but I don’t touch them,” she said.
Economists are calling it a perfect storm, hitting as countries unleashed spending to fuel an economic recovery from the COVID-19 pandemic. Rising customer demand overwhelmed factoriesports and freight yards, resulting in shortages that push up prices.
Add to that: the war in Ukraine has blocked exports of commodities such as steel and minerals, causing Western Europe to buzz, as well as raw materials such as grains and seed oilthus accentuating global shortages.
Inflation is running particularly high in the Central and Eastern European countries closest to Ukraine’s battlefields. Prices rose in April by 14.2% in the Czech Republic, 12.3% in Poland and 10.8% in Greece. They are a dazzling 61% in Turkey, that is… currency loses 44% of its value against the dollar last year.
Store workers from Warsaw to Istanbul say shoppers are cutting back, buying cheaper items, giving up nice things like fresh cut flowers and items they can put off like new clothes.
In the Turkish capital, butcher Bayram Koza said sales fell by 20% after prices nearly doubled, largely due to feed costs. That makes livestock farming unprofitable, and many farmers are selling and moving to the city, he said.
“Even in (the affluent district) Cankyaya, people no longer buy according to need, but according to what they can afford. Whoever bought two kilos of ground beef, now buys at most one kilo”, he says.
On the Greek island of Rhodes, seafood restaurant owner Paris Parasos gets up early in the morning to go fishing to keep costs down. But he still has to raise prices in his restaurant in the island’s main town when cooking oil prices quadrupled. In addition, gas and electricity bills for cooking are three times higher.
“I could lower the quality and use the oil more, but I refuse to do it. We want customers to return and expect the same quality,” said Parasos.
In Poland, bread prices have risen by 30%, sending shoppers to discount stores. Bakers in Belgium are firing workers as the prices for a loaf of bread rise by 30 cents to 2.70 euros ($2.85).
“I know bakers who work 13 or 14 hours a day to get out of here and pay their loans,” Albert Denoncin, president of the Francophone Bakery Federation, told La Premiere radio. “We can do it for a while, but if I hear from World Bank management that this will take until 2024, we won’t make it.”
In Spain, truck drivers have received some relief from diesel prices thanks to government emergency measures, including a small discount and permission to pass on higher fuel costs to customers.
Yet the burden is high. Óscar Baños, who drives his own freight trailer from the central Spanish city of Palencia, said tires have increased from €400 to €500, a new truck cabin has increased from €100,000 to €120,000 and a liter of diesel has increased from 1.20 to €500. 1.90 euros in the past year. That’s the equivalent of a gallon of gasoline rising from $4.80 to $7.60.
“There’s a lot of uncertainty, not just in our industry, but across the board,” Baños said.
The car market in Europe is also facing price increases such as factory closures in Ukraine, sanctions against Russia and an existing global shortage of semiconductors, the supply of parts needed to make cars is shrinking.
As a result, average new car prices in Europe are expected to rise $500 to $2,000 this year, according to Nishant Mishra, associate director of investment research at Acuity Knowledge Partners.
Back in Milan, the roundabout is just one of six locations that Ronzoni has had to close in recent months. He notices that he cannot deliver the work at the agreed prices.
Due to the high costs, companies are not offering to take on public works, including a bridge in Rome that would be the first project built with EU recovery funds. The money set aside for infrastructure, worth nearly half of the EU’s 220 billion euros, is at stake, along with the jobs it would create, according to the ANCE National Association of Construction Workers.
The government has announced 3 billion euros to help cover the increased prices, but builders are not enough, with costs averaging 40%, but sometimes much higher. Iron prices, for example, are up 170%, Ronzoni said.
“It’s exponential,” he said.
AP reporters Suzan Fraser in Ankara, Turkey; Monika Scislowska in Warsaw, Poland; Joseph Wilson in Barcelona, Spain; Derek Gatopoulos in Athens; Karel Janicek in Prague; Kelvin Chan in London; Paul Wiseman in Washington; Samuel Petrequin in Brussels; and Veselin Toshkov in Sofia, Bulgaria, contributed.