Brussels acknowledges that tensions between Israel and Hamas are increasing risks and uncertainty, but does not forecast a recession

The European Commission admits tensions in the Middle East are increasing “risks and uncertainty” for the European economy, although the impact has been contained for now, while the Eurogroup president dismisses a “deep recession”.

“For now, the impact of the tragedy in the Middle East, Israel and Gaza on energy markets is contained, but it is clear that there is a risk to these prices if the conflict escalates and, in any case, “New geopolitical tensions further increase risks and uncertainty,” he said European Commissioner for Economic Affairs Paolo Gentiloni.

Speaking at a press conference in Brussels after a meeting of eurozone finance ministers, the official noted that “the short-term outlook is challenging.”

“GDP [Produto Interno Bruto] contraction of 1% was recorded in the eurozone in the third quarter and zero in the European Union, and short-term indicators point to continued weak economic dynamics at the beginning of the current period,” he emphasized.

On Wednesday of next week, the 15th, the European Commission will present autumn economic forecasts, but Paolo Gentiloni noted that such forecasts “will take into account all factors.”

“In this context, the coordination of our economic and fiscal policies becomes even more important,” he urged.

Next week, on the 21st, the “European Semester Autumn Package” is scheduled to be published, with estimates of countries’ budget proposals for 2024, with the European Commission “assessing in detail” aspects such as “net primary expenditure growth.” income, the removal of energy support measures and whether public investments financed at the national level are being maintained,” said Paolo Gentiloni.

Portugal, represented at the meeting by Finance Minister João Nuno Mendes, has already submitted a budget plan for 2024 to Brussels on October 16, which may be changed taking into account the political crisis in the country.

Also speaking at the press conference, Eurogroup President Pascal Donohoe acknowledged that the eurozone economy has “seen some loss of dynamism,” which economic forecasts for next week should confirm.

However, Paschal Donohoe assured: “The eurozone remains resilient and there is no reason to expect a deep or prolonged recession.”

Also today, the International Monetary Fund (IMF) judged tensions between Israel and the Islamist group Hamas in the Middle East to have a “limited impact” on European economic activity after initial pressure in the energy sector, but warned of inflation risks. .

“Regarding the conflict between Israel and the Gaza Strip, in terms of impact we saw an initial increase in oil prices, but now the situation has completely changed and we have also seen this in Europe. [dado o inicial] increase in natural gas prices by approximately 10%. Therefore, the conflict has so far had a very limited impact on the activity of European economies on the price side,” said IMF Director for Europe Alfred Kammer at a meeting with European journalists in Brussels, including Lusa.

On the day the fund published its forecast for Europe’s regional economy, Alfred Kammer said that “additional impact will depend on the duration and intensity of this conflict.”

European gas prices rose again in mid-October, following a post-pandemic and post-energy crisis downward trend on fears of a wider conflict in the Middle East that could threaten gas flows.