European countries' economies are being squeezed by high energy and food import prices. This is making Europe poorer, a leading European Union official said this week.
High oil prices are being felt in Europe
EU Economic and Monetary Affairs Commissioner Joaquin Almunia said it is important to begin talking about the impact high prices are having on Europe's economic wellbeing.
Europe is sending revenue abroad to oil producers and exporters of raw materials such as grain and iron ore, Almunia told the European Parliament's economy committee on Monday, June 30.
"As Europe is dependent on energy from the outside world and as we also import a great number of commodities, this means the European economies are becoming poorer because of these price rises," he said. "This is a fact we are going to have to accept if we are to come up with responses."
Interest rate increase likely
While Almunia refused to put forward any specific suggestions, the European Central Bank (ECB) is likely to hike interest rates this week in an attempt to control inflation.
Inflation across the 15 countries which use the euro as their currency was at a record high of 4 percent in June.
High inflation has been blamed largely on oil prices, which rose to over 91 euros ($143) per barrel of crude on Monday. High inflation rates have led to protests by European truckers and fishermen.
Almunia warned that any new measure to provide relief from high prices should not "create new distortions in the market."
"We need to take care in avoiding creating an inflationary spiral and (focus) efforts here to protect the weakest parts of our population," he said.
Despite an economic slowdown, the ECB has signaled that it will raise interest rates by a quarter of a percentage point to 4.25 percent on Thursday in an attempt to cool inflation.