By John Meyer, consultant in financial affairs – Eurasia Business News, January 7, 2024

Euro area annual inflation is expected to be 2.9% in December 2023, up from 2.4% in November according to a flash estimate from Eurostat, the statistical office of the European Union.

Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in December (6.1%, compared with 6.9% in November), followed by services (4.0%, stable compared with November), non-energy industrial goods (2.5%, compared with 2.9% in November) and energy (-6.7%, compared with -11.5% in November).

The latest ECB projections suggest a gradual normalization of inflation rates, with headline inflation expected to average 2.7% in 2024, eventually reaching 1.9% by 2026.

Inflation and democracy

The social pact of European democracies is disintegrating before our eyes. More and more citizens are questioning the legal authority and legitimacy of governments, their policies and financial capitalism. The middle class in France as in Germany is less and less willing to work more to earn less. Weak GDP growth in the Eurozone is maintaining the unemployment rate. The high public debt of the Eurozone States is now leading, with interest rates of nearly 5%, to debt trap situations. This leads to a mechanical impoverishment of national economies and their stakeholders, businesses and citizens.

Workers from the middle class cannot anymore buy a home, because of high interest rates and the real estate bubbles in countries like France, Germany and the the Netherlands.

Europe has been facing a housing crisis, with a collapse in home building intensifying shortages. Home prices are already falling in some parts of Europe, with a 5% to 10% drop projected by the end of 2024.

Amid lasting inflation since summer 2021, many investors and middle class workers turn to gold, as a safe heaven to protect their purchasing power. On January 5, gold prices hit $ 2,045 per troy ounce.

Read also : How to invest in gold

The European real estate market will be the next victim of rising interest rates and the fall in purchasing power of the middle classes.

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