Over the past few months, monthly inflation readings in the eurozone have been getting higher and higher meaning European citizens' finances are getting more and more strained.
The rise in inflation — it reached 8.6% in June — has been led by a dramatic surge in energy prices which has also impacted other essential goods and services including foods.
Governments have tried to ease the financial burden for households by handing out energy checks or freezing electricity prices while the European Central Bank (ECB) — whose mandate is to keep inflation to around 2% — has upped its interest rates for the first time in 11 years.
But the worst may well be to come as Russia has sharply squeezed gas supply to the European Union, possibly endangering their ability to ensure they have enough to ride out the winter. Member states have now pledged to cut their consumption of gas over the coming months in order to put all their chances on their side.
How did Europe get there and how can it break the inflationary cycle or shield its citizens? We put these questions to a panel of experts during a July 28 debate.
Here are the key takeaways.
What got us there?
Vicky Pryce, Chief Economic Adviser at the Centre for Economics and Business Research, said the situation is the result of a "perfect storm" that started during the COVID-19 pandemic as governments pumped a lot into their economies to prop them up while businesses were hindered by supply chain disruptions as a result of closed borders and labour shortages.
But when restrictions were eased, "all that pent-up demand led to quite a substantial pickup in prices that was happening through 2021", she went on, adding that just as prices were starting to plateau with supply chain constraints finally starting to ease, Russia's war in Ukraine threw the world economy into another loop.
"That has completely upset any forecasts that were made on inflation by the central banks, because, of course, gas prices, oil prices, food prices all went up to a very significant extent, in some cases going up five times, like the gas prices and other months," she pointed out.
Can the ECB fight off this inflationary pressure?
The ECB responded to the rise in inflation by increasing its interest rates, something it hadn't done in over a decade, in a bid to increase borrowing costs and take some money out of the system.
"That was a good sign," said Michiel Hoogeveen, a Dutch member of the European Parliament from the European Conservatives and Reformists Group.
"However, it was still a little too late, unfortunately," he continued.
"If we look at countries within the eurozone, certain member states, they still haven't reformed their economies. They still haven't put in the necessary austerity measures that should have been put in place after the euro crisis. So we are seeing that we are in this eurozone with countries laden with public debt that we now have to compensate with new types of instruments."
Pryce, who is a former Joint Head of the UK Government Economics Service, also believes the ECB to be "in a very, very difficult position right now".
This is because there are worries that "by raising rates it might actually lead to a serious slowdown in growth, which will have perhaps worse consequences for everyone."
What should governments do?
Russia's ongoing war in Ukraine has revealed just how dependent Europe has been on the Kremlin for its energy needs and how vulnerable it is to price fluctuations.
Making the economy more sustainable is thus a requirement, and that starts with more green energy.
"It's a bit of a missed opportunity in the last couple of years that investment wasn't chosen about a transition to energy sustainable future," said Colm Markey, an Irish member of the European Parliament from the European People's Party.
"Because I think energy is the pinch point. Energy is the pinch point when it comes to food, energy is the pinch point when it comes to transport.
"The bigger opportunity here is that investment needs to be in a way that helps us with our transition to a more sustainable energy scenario where we're, let's say, scaling up renewable energies in particular. And I see that there is massive potential in terms of, let's say, offshore wind and various things like that, where we could take them a big advantage in the scenario we find ourselves if we're going to invest money in the economy," he argued.
Monique Goyens, the Director-General of The European Consumer Organisation (BEUC), also called for investments in energy-efficient housing and renewables, which she described as "a social measure" because it can help people move out of energy poverty.
"If you help them by supporting retrofitting or renovating the houses to have a lower energy bill, you get them out of poverty. And that means also that they don't need to choose between food and energy," she said.
In the immediate future, though, national authorities should focus on helping the most vulnerable and "engage in an unequal policy, meaning positive discrimination in favour of the less affluent households," she explained.
This would require governments to target financial assistance at less affluent households for longer rather than to also give hand-outs to households that can take the short-term financial hit.
How can consumers reduce their bills?
Luckily, Goyens emphasised, "there is also a huge untapped potential of saving costs for people. When you look at energy, the way energy is being spent by people, there is a lot that can be done immediately without any costs."
She cited defrosting refrigerators and freezers and switching off appliances completely rather than keeping them on standby.
Additionally, behaviours that people developed during COVID-19 lockdowns because of uncertainty over how the job market and the overall economy would be impacted should return to the fore, said Kevin Mountford, the co-founder of Raisin UK, a marketplace that connects consumers and institutions to banks with top savings rates.
He flagged that the average UK household saved £100 (€119) a week during the various lockdowns because of behavioural changes.
"I think some of that kind of discipline needs to come back into place. We can be more efficient, we can be smarter. You know, I look around my house now and I'm switching lights off in a way I've never done before. We've got smart metres," he emphasised.
"I don't think I've ever looked at those things before, but I'm now looking at kind of usage levels. I keep an eye on, you know, my fuel," he also said. "So I think we can all improve the way that we behave."