Milan
Edoardo Ronzoni surveys a construction site near Milan that closed in March as material costs soared. He can’t complete a half-built roundabout at an intersection notorious for fender-bender crashes because asphalt, cast-iron pipes and concrete are too expensive, prices exacerbated by Russia’s war in Ukraine.
Public works projects in Italy are grinding to a halt just as the European Union injects 108 billion euros ($114 billion) in pandemic recovery money intended to start a construction frenzy.
Mr. Ronzoni laments that his company has already lost its busiest three months and hopes that the worst is yet to come: “We are afraid we won’t be able to work this year. We are closing all of our sites.”
The war has accelerated inflation in Europe and the world, with the prices of energy, materials and food rising at a rate not seen in decades. It’s causing a stir at grocery stores, gas pumps, electricity bills and construction sites.
Rising oil and gas prices are the key driver of inflation in Europe, which relies heavily on Russian energy for electricity generation and the energy industry. Inflation is expected to hit nearly 7% this year in the 27-nation EU and is helping to slow growth forecasts.
Fishmongers and farmers are forced to charge prices for their catches and harvests that even they consider astronomical. High fuel prices threaten to paralyze land transport of goods. Bread prices are skyrocketing from Poland to Belgium. Protests over price hikes have broken out in places like Bulgaria. While governments have responded with tax cuts and other aid, they face constraints in mitigating the impact of volatility in energy markets.
Even the thrifty, with backyard chickens, wonder if the price of the feed is worth the eggs they produce. Alina Czernik, a store clerk in Warsaw, does the math, as she sees grain prices for her chicken rise 150%, to 200 zlotys ($45) per 100 kilograms (220 pounds).
It is spreading a sense of worthlessness, especially for those with low incomes.
“I have been a positive person, but for now I cannot see the light at the end of the tunnel,” said Eva Fuchsova, a mother of three who lives in the town of Touskov, in the west of the Czech Republic.
“I have to tighten my belt. I buy fruits and vegetables so that my children have everything, but I don’t touch them,” she said.
Economists are calling it a perfect storm, hitting as countries unleashed spending to spur an economic rebound from the COVID-19 pandemic. Growing customer demand overwhelmed factories, ports, and freight yards, and the resulting shortages drove prices up.
Add to that: the war in Ukraine has blocked exports of raw materials like steel and minerals that kept Western Europe going, as well as staples like grain and seed oil, exacerbating global shortages.
Inflation is rising especially in the Central and Eastern European countries closest to Ukraine’s battlefields. Prices in April rose 14.2% in the Czech Republic, 12.3% in Poland and 10.8% in Greece. They are a staggering 61% in Turkey, whose currency lost 44% of its value against the dollar last year.
Shop workers from Warsaw to Istanbul say customers are cutting back, buying lower-priced items and forgoing niceties like fresh-cut flowers and items that can hold up, like new clothes.
In the Turkish capital, butcher Bayram Koza said he has seen a 20% drop in sales after prices almost doubled, largely due to the cost of feed. That makes ranching unprofitable and many farmers are selling and moving to the city, he said.
“Even in [the affluent district of] Cankyaya, people no longer buy according to their needs, but according to what they can afford. Those who used to buy two kilos of ground beef now buy at most a kilo,” he said.
On the Greek island of Rhodes, fish restaurant owner Paris Parasos gets up at dawn to go fishing to keep costs down. But he has still had to raise prices at his restaurant in the island’s main town, as cooking oil prices quadrupled. In addition, gas and electricity bills for cooking are three times higher.
“I could lower the quality and use more oil, but I refuse to do it. We want customers to come back and expect the same quality,” said Mr. Parasos.
In Poland, bread prices rose 30%, driving shoppers to discount stores. Bakers in Belgium are laying off workers as prices for a loaf rise 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 honor their loans,” Albert Denoncin, president of the French-speaking bakery federation, told La Premiere radio. “We can do it for a while, but when I hear from World Bank management that this will last until 2024, we won’t make it.”
In Spain, truckers have gotten some relief from diesel prices thanks to government emergency measures, which include a small discount and permission to pass on higher fuel costs to customers.
Still, the load is high. Óscar Baños, who drives his own cargo trailer out of the central Spanish city of Palencia, said tires have gone up from €400 to €500, the cab of a new truck has gone up from €100,000 to €120,000 and the liter of diesel has risen from 1.20 to 1.90 euros in the last year. That’s the equivalent of a gallon of gas going up from $4.80 to $7.60.
“There is a lot of uncertainty, not only in our sector but in all areas,” said Baños.
Europe’s car market is also facing price increases as factory closures in Ukraine, sanctions on Russia and a global shortage of semiconductors reduce the supply of components needed to make cars.
As a result, average new car prices in Europe are expected to rise from $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 half a dozen non-EU funded sites that Ronzoni has had to shut down in recent months. He is unable to deliver the work at the contracted prices.
High costs mean companies are not bidding to take on public works, including a bridge in Rome that was to be the first project built with EU recovery funds. With the tender stalled, money earmarked for infrastructure, worth nearly half of the EU’s €220 billion, is at risk, along with the jobs it would create, according to the National Association of Construction Workers in ANCE.
The government has announced 3,000 million euros to help cover the increase in prices, but for builders it is not enough, with costs rising by an average of 40%, but sometimes much more. Iron prices, for example, are up 170%, Ronzoni said.
“It’s exponential,” he said.
This story was reported by The Associated Press. 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.