Written by COLLEEN BARRY – AP Business Writer
MILAN (AP) – Edouard Ronzoni is inspecting a construction site near Milan, which he closed in March, as material costs have risen sharply. He cannot complete the half-built roundabout at the intersection known by the brigades because asphalt, cast iron pipes and concrete are too expensive – prices have worsened with Russia’s war in Ukraine.
Public works projects in Italy are coming to a halt as the European Union invests 108 billion euros ($ 114 billion) in pandemic recovery money designed to start a construction frenzy.
Ronzoni complains that his company has already lost three of the busiest months, and expects the worst to come: “We are afraid we will not be able to work this year. We are closing all our sites. “
The war has accelerated inflation across Europe and the world, and prices for energy, materials and food are rising at a rate not seen in decades. This is a shock to the grocery store, gas pumps, electricity bills and construction sites.
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Rising oil and gas prices are a key factor in inflation in Europe, which is heavily dependent on Russian energy to produce electricity and energy. Inflation in the 27 EU countries is expected to reach almost 7% this year, slowing growth.
Fish traders and farmers are forced to charge prices for their catches and harvests, which even they consider astronomical. High fuel prices threaten to paralyze land freight transport. Bread prices are rising from Poland to Belgium. Protests against rising prices have erupted in places like Bulgaria. Although governments have responded with tax cuts and other assistance, they are facing constraints in easing the impact of volatile energy markets.
Even thrifty ones, with backyard chickens, wonder if the cost of feeding those eggs they give is worth it. Alina Czernik, a shop assistant in Warsaw, is calculating as she sees grain prices for her chicken rise 150% to 200 zlotys ($ 45) per 100 kilograms (220 pounds).
This spreads a sense of futility, especially for those with low incomes.
“I was a positive person, but I still don’t see the light at the end of the tunnel,” said Eva Fuksa, a mother of three who lives in the western Czech town of Tovsk.
“I need to tighten my belt. I buy fruits and vegetables so that my children have everything, but I don’t touch it, ”she said.
Economists called it a perfect storm when countries unleashed spending to spur economic recovery after the COVID-19 pandemic. Rising consumer demand overcrowded factories, ports and cargo shipyards, resulting in a deficit that increased prices.
Add to this: the war in Ukraine blocked the export of raw materials such as steel and minerals that remained in Western Europe, as well as goods such as grain and oil, which highlighted the shortage in the world.
Particularly hot inflation is observed in Central and Eastern Europe, close to the battlefields of Ukraine. In April, prices in the Czech Republic rose by 14.2%, in Poland – by 12.3%, in Greece – by 10.8%. In Turkey, which lost 44% of its value against the dollar last year, it is 61% in Turkey.
Store workers from Warsaw to Istanbul say shoppers are shrinking, buying goods at a cheaper price, giving up subtleties like fresh flowers and things they can put aside, such as new clothes.
In the Turkish capital, butcher Bajram Koza said he noticed a 20% drop in sales after prices nearly doubled, mainly due to the cost of feed. This makes livestock unprofitable, and many farmers sell and move to the city, he said.
“Even in the (affluent district) of Chanka, people are no longer buying for their own needs, but for what they can afford. Those who bought two kilograms of minced beef now buy a maximum of a kilogram, ”he said.
On the Greek island of Rados, the owner of a fish restaurant, Paris Paras, gets up at dawn to go fishing to cut costs. But he still had to raise prices at his restaurant in the island’s main city as oil prices quadrupled. In addition, the bills for gas and electricity when cooking are three times higher.
“I could lower the quality and use more oil, but I refuse to do that. We want customers to come back and expect the same quality,” Parasos said.
In Poland, bread prices have risen by 30%, which sends buyers to discount points. Bakers in Belgium are laying off workers as loaf prices have risen by 30 cents to 2.70 euros ($ 2.85).
“I know bakers who work 13 or 14 hours a day to get out of this and fulfill their loans,” said Albert Denoncin, president of the French-speaking Bakery Federation, in an interview with La Premiere radio. “We can do this for a while, but when I hear from the World Bank leadership that it will continue until 2024, we do not have time.”
In Spain, truckers have received some relief from diesel prices thanks to emergency government measures, including a small discount and permission to pass on to customers higher fuel costs.
Still, the load is great. Oscar Banyos, who rides his trailer from the central Spanish city of Palencia, said tires have risen from 400 to 500 euros, the cab of a new truck has risen from 100,000 to 120,000 euros, and a liter of diesel has risen from 1.20 to 1.90 euro last year. This is the equivalent of a gallon of gasoline, which rose from $ 4.80 to $ 7.60.
“There is a lot of uncertainty not only in our sector, but in everything,” Banyos said.
Europe’s car market is also facing rising prices as plant closures in Ukraine, sanctions against Russia and the existing global shortage of semiconductors cut supplies of components needed to make cars.
As a result, average prices for new cars in Europe are expected to rise this year by $ 500-2,000, according to Nishant Mishr, deputy director of investment research at Acuity Knowledge Partners.
In Milan, the roundabout is just one of half a dozen non-EU-funded facilities that Ronzoni has been forced to close in recent months. He is unable to deliver the work at contract prices.
The high costs mean that companies are not bidding for public works, including the bridge in Rome, which was to be the first project built with EU funds for reconstruction. Due to the cessation of bidding, the money allocated for infrastructure – worth almost half of the 220 billion euros from the EU – is under threat, along with the jobs they will bring, according to the National Association of Builders ANCE.
The government has announced 3 billion euros to help cover higher prices, but this is not enough for builders: costs increase by an average of 40%, but sometimes much higher. Iron prices, for example, rose 170%, Ronzoni said.
“It’s exponential,” he said.
AP reporters Susan Fraser in Ankara, Turkey; Monica Szczylowska in Warsaw, Poland; Joseph Wilson in Barcelona, Spain; Derek Gatapoulos in Athens; Karel Janicek in Prague; Kelvin Chan in London; Paul Wiseman of Washington; Samuel Petreken in Brussels; and Veselin Toshkov in Sofia, Bulgaria, contributed.
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