Amid the conflict in the Middle East, European Central Bank (ECB) President Christine Lagarde has advocated for the development of renewable energy and pointed to the instability of the European energy system.
„Europe imports around 60% of its energy needs, almost entirely in the form of fossil fuels“, Lagarde said at an ECB press conference dedicated to climate, nature and monetary policy. “Today's sharp rise in energy prices clearly shows the cost of this dependence“, she said.
Alternative energy sources, according to Lagarde, are the best way to reconcile the contradictions between the goals of Europe's energy policy: security, environmental friendliness and affordability. An ECB analysis of rising energy prices shows that countries with a higher share of electricity from non-fossil fuels, such as Spain and Portugal, are better protected from rising gas prices. At the same time, Lagarde pointed to the costs associated with climate change. Weather events that negatively affect agricultural production can lead to higher food prices.
Such events, the ECB head explained, can also negatively affect economic indicators, possibly more seriously than expected. “The ECB's analysis found that regional economic performance remains depressed by an average of 3 percentage points even four years after a drought or flood,“ Lagarde said.
In light of the conflict in the Middle East, oil and gas prices have risen sharply on the global market, weighing on companies and consumers. Amid the price shock, eurozone inflation rose to 3% in April, well above the ECB's medium-term target of 2%. A key interest rate hike is planned for June due to inflationary pressures.