Bank of Italy Warns Eurozone Inflation Could Surge Above 6 Percent
Speaking during his annual address on the state of the Italian economy, Panetta said growth had faltered following years of relative resilience, with the deterioration driven by a toxic combination of worsening geopolitical tensions, US tariffs, and deepening economic weakness in Germany — Italy's most important trading partner, according to a news agency.
"More recently, momentum has slowed," Panetta said, adding that the Gulf conflict had "weakened already fragile prospects."
In the most severe scenarios, Panetta warned that a prolonged conflict — particularly one causing further damage to regional energy infrastructure — could shave approximately one full percentage point off eurozone growth across 2026 and 2027, while simultaneously unleashing a dangerous inflationary spiral.
"Inflation could reach a peak above 6% and, if not countered, remain for a long time above the target as the energy shock spreads to an increasing number of sectors," he said, drawing on scenario analysis published by the European Central Bank.
Panetta issued an urgent call for Europe to accelerate its response to global instability, stressing that the bloc must "translate priorities into decisions, investment and results" and deepen internal unity if it is to remain economically competitive on the world stage.
The stark assessment adds to a growing chorus of alarm from European policymakers as the region grapples with the compounding pressures of geopolitical disruption, energy volatility, and slowing demand.
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