She considers herself powerless Hellas against his “ghost”. stagflation rating agency Moody’sbecause, despite being less prone to a sustained high inflation scenario than the rest of Southern Europe, policy options to combat the stagnant cycle are among the weakest in European Union. In fact, according to the House of Representatives, the scenario of inflation stagnation is now the most likely for the EU, which negatively affects the creditworthiness of the most vulnerable countries.

As he points out, Russian invasion of Ukraine worsened underlying supply and demand and pushed inflation to levels never seen before in the EU. since the mid-1980s, in particular, consumer price inflation reached 9.6% in June 2022, the highest level since 1983, while more than half of the countries recorded double-digit inflation rates.

While global supply chain problems, partly to blame for the recent price spike, may have eased a little, businesses continue to report serious equipment and material shortages. While not in line with Moody’s base case, a total shutdown of Russian gas supplies is likely to add to these pressures, dampen economic activity and increase the risk of a stagnation in the inflationary environment.

Based on their weaker economic developmentgreater exposure to sustained high inflation and limited policy options, southern European states seem more prone to a stagflation scenario, i.e. a multi-year period in which inflation remains much higher than in recent decades and real GDP growth remains well below zero or close to zero.

Malta, Cyprus, Portugal, Slovenia and Croatia are more vulnerable because they are more likely to see temporary price increases become permanent and they have relatively few policy options, the chamber said. In addition, while Italy, France and Spain are less vulnerable to inflation, already high levels of debt, increased exposure to floating interest rates and significant principal and interest payments over the next 12 months add to the risks.

At the same time, Greece and Romania, while appearing less prone to a sustained inflation scenario, nonetheless have some of the weakest policy options in the EU to combat a stagnant inflationary cycle.

To reach this conclusion, the House of Representatives evaluates state policy options to combat the stagnant cycle based on:

– Economic strength, reflecting the stability of the economy, as well as the effectiveness of monetary and macroeconomic policies.

– Fiscal performance and fiscal performance, reflecting both the government’s ability to fight stagnant inflation and the likelihood that it will do so effectively through targeted fiscal policy.

– Social risks, demonstrating the potential pressure governments will face to use fiscal policy to support the economy.

According to Moody’s, Greece has the weakest of the above “weapons” in the entire EU, its financial stability is very low due to its debt-to-GDP ratio, its economic strength is also low, which is reflected in a very low growth trend. (growth trend), and social risks are increasing due to the still high unemployment rate, especially among young people.