As European Union (EU) leaders meet in Brussels on Thursday for a two-day summit, they have been tasked with seeking solutions to soaring oil and food prices which recently ignited widespread protests in Europe.
While the summit will be dominated by the political crisis resulting from the Irish rejection of the Lisbon Treaty, it is not surprising that rising oil and food prices are also high on the agenda due to their economic and social consequences in the EU.
World oil prices were approaching 140 US dollars per barrel this week, a record level once unimaginable, while food prices remain high. Both are pushing up inflation in the 27-nation bloc, undermining household purchasing power and hitting the poor hardest.
Latest figures from the EU's statistics bureau Eurostat showed annual inflation in the EU jumped to 3.9 percent in May, nearly doubling the rate recorded a year ago.
In the euro zone, a sub-EU club of 15 countries using the same currency, inflation rose to 3.7 percent, the highest level since the introduction of the euro in 1999, with energy prices up 13.7 percent and food prices 6.4 percent from a year ago.
High inflation dampened private consumption, a major booster to the EU economic growth. Consumer confidence in the EU has so far dropped below its long-term average, raising alarms about the economic outlook.
As the European economy would markedly slow down this year due to persistent financial turmoil and the unfavorable global environment, high inflation has limited the room for European policy makers to stimulate growth – preventing central banks from lowering interest rates.
Compared with the overall impact, certain industries which heavily rely on energy or food, such as fisheries and transportation, have suffered even more, causing concerns about social stability.