Inflation and instability

Last Updated on Thursday, 12 October, 2023 at 11:06 am by Andre Camilleri

Presently, the world is passing through a lot of unrests, including several conflicts characterised mostly by arms aggressions in different parts of the world, as well as economic instability fuelled by inflationary pressures. What we knew and were accustomed to as Rules-Based-Orders, have become actually abnormal.

On the eastern side of the European continent the war in Ukraine has been lingering for the past 19 months, while in Central Asia, Azerbaijan managed to win the disputed territories in Nagorno-Karabakh through arms aggression, to the length of pushing thousands of Armenians out of what, until recently, they called home. In Africa, the instability covers the regions of Sudan, further up to the Sahel, and parts of Libya. Sadly, another war is escalating at the borders of Egypt along the Gaza Strip. The war between Israel and Palestine is degenerating, after the group Hamas launched rockets that hit several civilians, leaving many injured and dead. Surely, there are different invisible hands behind these attacks that are purposely creating regional instabilities. The attention has now shifted from Ukraine to the Middle East.

Personally, I thought that the EU could explore using its former civilian mission EUBAM-Rafah to create safe corridors for refugees from Gaza to Egypt. However, it seems difficult because even the area was heavily bombed. Certainly, the EU must use its knowledge of the region and all the capabilities to promote dialogue. In any war, civilians must be protected. It is called the Geneva Convention. The EU should engage with the Palestinian, Israeli and Egyptian authorities to ascertain safe corridors and the management of the crossings. When you think about it, the instability in Ukraine is leaving the effects not just within the borders of eastern Europe but also to other parts of the world. Certainly, the restriction of food supplies and inflation is impinging on everyone. The restriction of food exports from Ukrainian ports created a delicate situation on the agriculture markets not just for the bordering countries, especially Poland but also elsewhere around the globe. Inflation is crippling economies, with many people being left impoverished. It is creating additional instability between friendly countries. For instance, Poland receives gargantuan sums of money for their agricultural sector. When I sat as budget attaché in Council, relatively, Malta was the highest contributor when it comes to agricultural funding.

Let us all remember that in mediaeval times Ukraine was part of the Polish and Lithuanian Commonwealth. It could also be the reason why they call each other siblings. However, the family bond lasted until the mess created with the famous solidarity lanes to export grains from Ukraine. When the agricultural products arrived at the Polish borders and made it to the black-market, people started purchasing food products at a very low price because the market was flooded with excessive produce. In response, the Polish government, along with Hungary and Slovakia, introduced unilateral restrictions on Ukrainian agricultural imports. These measures were introduced to protect the agricultural markets, after the EU’s wide measures allowed exports from Ukraine, through the solidarity lanes which expired in mid-September. Meanwhile, President Volodymyr Zelensky, filed a lawsuit against the three countries at the World Trade Association (WTO).

This created tensions between the two countries. Indeed, the prime minister of Poland declared that they would stop sending additional military aid and equipment to Ukraine, as they needed the military capabilities to mitigate risks and protect their territories. At the same time, Prime Minister Orban asked Kyiv to remove Hungary’s largest bank from the list of war sponsors if they wanted the release of the funds from the European Peace Facility. To make matters worse, Slovakia is restricting military aid to Ukraine, after a pro-Kremlin figure secured more votes than expected in an election held earlier this month. Political observers are saying that this outcome could pose additional challenges to the EU’s unity over Ukraine, and also to NATO.

Certainly, inflation is not under control. The President of the European Central Bank is using the monetary policy tools at the governing council’s disposal to control inflation. It is way far from the ECB’s 2% inflation target. President Lagarde is doing her utmost. However, monetary tightening creates additional economic problems, especially when the problems are all related to supply. We have a situation where the EU is rallying against time. Although we must support other countries, we must assist our citizens, too. Charity begins at home. We cannot allow populism to spread out of control in Europe. If this happens, surely, the EU won’t be in a position to assist other countries. We must remind ourselves what happened before the second world war. For this not to happen we must assist our citizens. Eurocrats must scrap their bureaucratic policies. From time to time, each member state elects democratic governments and populism seems to be on the rise. There is a positive correlation between economic woes and populist governments. Clearly, this is all connected to economic problems, creating additional political instabilities.

Certainly, the world was not prepared for another massive economic shock. We had too many economic shocks to be able to deal with the war in Ukraine. The political trajectories were already fragile. Now they left the economic strengths unfurl into broken fragments. Some countries were still recovering from the financial crisis of the preceding decade, followed by the migration crisis and the global pandemic. The war in Ukraine turned into a nightmare not just for Ukrainians, but also for several other countries. What we must ensure is that citizens go out to vote for the European elections. We cannot allow the same political figures, especially in certain positions, to retain the status quo. What they are after is certainly the consolidation of additional powers to remove the unanimity principle under the common and foreign security policy of the EU. If this happens, it would be the end of the limited sovereignty of each member state.

Finally, we must avoid a situation where the EU’s political discourse is simply defence and security. It is important; but more importantly is to not allow Far Right politics to take over Europe. Else, we are all doomed.

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