Annual inflation in the eurozone climbed to 3% in April, up from 2.6% in March, driven by a 10.9% increase in energy prices. This surge in costs directly impacts the working class across the 21 countries that use the shared euro currency.
Crude oil was trading above $120 per barrel, a substantial rise from around $73 before the outbreak of the war on Feb. 28. This increase in oil prices, stemming from the Iran war, has been quickly reflected at gas stations and in the price of jet fuel, transferring higher costs to consumers and industries.
War Fuels Capital Accumulation
The war was described as dealing a huge shock to the global economy because Iran has blocked the Strait of Hormuz. This waterway formerly saw around 20% of the world’s oil pass through it on its way to customers from producers in the Persian Gulf. The blockade creates conditions for scarcity and higher prices, ensuring increased profits for those who control oil supplies and financial markets.
The eurozone's growth for the first three months of the year increased by a mere 0.1% over the previous quarter. This modest growth stands in stark contrast to the escalating inflation, suggesting that any economic activity is not translating into improved living standards for the majority, but rather into concentrated profits for capital.
Workers Bear the Burden
Rising inflation has raised concerns that it may become built into the economy along with slow or nonexistent growth, a policy conundrum dubbed stagflation. This scenario disproportionately impacts workers whose wages often fail to keep pace with the rising cost of essential goods and services, effectively suppressing their real wages.
ECB President Christine Lagarde stated at a post-decision news conference that the bank’s governing council had debated a rate rise Thursday. She said the council would revisit the bank’s stance with new information at the next meeting on June 11, without committing to any particular path for rates. This deferral of action leaves workers vulnerable to continued price increases.
The Central Bank's Stance
Despite annual inflation now clearly above the bank’s target of 2%, ECB policymakers left their benchmark interest rate unchanged Thursday. The bank’s benchmark rate has been unchanged at 2% since June 2025, less than one year ago, indicating a consistent policy that does not prioritize curbing the rising costs faced by workers.
Lagarde dismissed the term "stagflation," stating, "We don’t apply that flashy term, ‘stagflation,’ to the circumstances that we have." She asserted that the situation today was not comparable to the 1970s, which saw high inflation after twin oil shocks from the 1973 Arab oil embargo against the US, 53 years ago, and the 1979 Iranian revolution, 47 years ago. Lagarde claimed the current situation had "inflation less ingrained" and a "stronger labor market supporting an economy that is not in recession." This rhetoric serves to downplay the economic hardship faced by ordinary people while the structural conditions for capital accumulation through conflict persist.