Economy

For 400 years, Carletta Heinz’s family has produced bespoke glass bottles for the world’s leading perfumeries in a factory on the edges of Germany’s Franconian forest. But Russia’s invasion of Ukraine may force the 38-year-old chief executive to close the business before it enters its fifth century.In the event of prolonged gas shortages, if Moscow decides to cut supplies to European countries that have imposed sanctions on Russia over the war, “we won’t be able to survive as a company”, she said. “We’d have to shut down the [glass-melting furnaces] completely, we’d lose the workforce . . . and it would be very hard to just restart production after a year or two.”Heinz-Glas is not the only German company raising the alarm. More than half the natural gas consumed in the country each year comes from Russia — the highest share for any major EU economy — and gas-reliant industries are warning that by winter their operations could be at the mercy of Moscow.Their fears were heightened on Wednesday when the German government, worried Russia would cut off gas supplies after EU states rebuffed Moscow’s demand to be paid in roubles, activated the first of three warning stages in its emergency supply plan.

Under a law put in place during Arab exporters’ oil embargo of the 1970s, German industry would be forced to curtail gas consumption in the event of a shortage, with supplies reserved for critical infrastructure and households.Such a step would cost Europe’s largest economy tens of billions of euros, estimates suggest, and could plunge it into recession. Union leaders have warned hundreds of thousands of jobs would be at risk.The German economy could even enter its “worst crisis since the end of the second world war”, Martin Brudermüller, chief executive of BASF, the world’s largest chemical company by sales, told the Frankfurter Allgemeine Sonntagszeitung broadsheet on Thursday.Christian Seyfert, the head of VIK, which represents energy-intensive German groups such as steel or chemical manufacturers, said the crisis “could definitely be worse than the [Covid-19] pandemic”. Coronavirus “hit our members very hard, but thanks in part to demand from China, there was soon an economic recovery”, he said. “This is a situation of even greater concern.”While many German companies have adjusted their earnings forecasts to account for rising energy costs as a result of the war, some of the country’s core industries say they will not be able to operate without sufficient gas supplies.A worker at Heinz-Glas. The 400-year-old company faces closure if the Ukraine war causes prolonged gas shortagesHeinz-Glas’s furnaces — most of which are heated with gas to 1,600C — run round the clock, with roughly six glowing bottles emerging from the production line every second of the day. They are delivered to prominent customers across the world, including Yves Saint Laurent, Tiffany and Estée Lauder. If cooled, the molten glass in the furnaces would solidify and the equipment would have to be replaced, at a cost of millions of euros.The much larger chemical and steel industries face a similar predicament. About 15 per cent of Germany’s gas supply is consumed by the chemical sector, according to VCI, its representative body. BASF’s plant in Ludwigshafen in south-west Germany — the world’s largest integrated chemical complex — uses almost 4 per cent of the country’s gas.While gas used for electricity generation can be replaced by coal-fired power stations, its role as a raw material or a fuel for blast furnaces and other industrial processes is not easily substituted.BASF told the FT that steam crackers — units that break hydrocarbons into basic chemical components — at its Ludwighsafen site would come to a complete standstill if gas deliveries dropped below 50 per cent of their normal level, endangering the supply of substances used for medical, hygiene and food products.Henrik Follmann, head of family-owned chemicals manufacturer Follman Chemie, based in North Rhine-Westphalia in western Germany, said gas supplies were crucial to making naphtha. “We need this feedstock,” he said. “If we don’t get it, the refineries are going to stop, then the chemical industry will stop and the whole of German industry will stop.”He added: “I supply chemicals to the wood and furniture industries — if they don’t get it from me what are they going to do? It is the same for the chipmaking industry, which relies on chemicals, or the carmaking industry.”Steelmakers are similarly alarmed by the government proposals. In the western city of Duisburg, the blast furnaces at Europe’s largest steelworks rely on gas as a back-up if their coal supplies run short. Carletta Heinz, chief executive of Heinz-Glas, right, and her father and former company head Carl-August Heinz. Moving production away from Germany would be the last resort, the family says © Lisa Lampert-MüllerA person close to Thyssenkrupp, which owns the plant, said: “Going under a critical amount of gas [supply] would be dangerous. It would cause serious damage to our assets.” Any cut in Germany’s gas supplies is unlikely to exceed 50 per cent, say analysts. So-called “demand destruction” caused by soaring prices would cut gas consumption, they argue. Meanwhile, roughly a third of Russian imports could be replaced by deliveries from other countries, according to BDEW, which represents German utilities.Efforts to curb domestic gas use could further reduce the pain. In the event of a supply crunch, according to Allianz economists, “for every one [percentage point] reduction in the gas consumption of households . . . up to 25,000 jobs will be protected in manufacturing”.It is unclear whether energy suppliers would be deemed liable if they failed to deliver gas to customers. If the government forced suppliers to cut deliveries, utility groups would be shielded from compensation claims, according to Christian Hampel, a partner at BDO Legal who is advising companies on the potential fallout from gas shortages.

But “as long as a replacement procurement is possible, the gas supplier must deliver”, he added. Suppliers’ economic existence “may be at risk” if they are forced to pay exorbitant prices for replacement gas or compensate customers, he said.While German industry has faced energy crises in the past, the government seemed unprepared this time, according to executives. Carletta Heinz’s father, Carl-August, led the family’s glass company through the 1970s oil embargo. But the retired 71-year-old said this crisis was “clearly the more dangerous one”.Moving production away from Germany “would be the very last resort”, Carletta Heinz said. She remained unimpressed by the political decisions that had led to her company facing an existential threat.“Our country has really failed to secure a second source [for gas],” she said. “No company would do it this way.” More

Wages climbed at a rapid pace in the year through March and the unemployment rate dropped notably last month, signs of a hot labor market that could keep pressure on the Federal Reserve as it contemplates how much and how quickly to cool down the economy.The central bank is trying to slow demand to a more sustainable pace at a moment when inflation is running at its fastest pace in 40 years. Fed officials began raising interest rates in March and have suggested that they may increase rates by half a percentage point in May — twice as much as usual. Making money more expensive to borrow and spend can slow consumption and eventually hiring, tempering wage and price growth.Friday’s employment report could bolster the case for at least one half-point increase.Wages have picked up by 5.6 percent over the past year, the report showed, a far quicker pace than the 2 to 3 percent annual pay gains that were typical during the 2010s. At the same time, the jobless rate fell, to 3.6 percent in March from 3.8 percent in February. Unemployment is now just slightly above the half-century lows it had reached before the pandemic.The unemployment rate continued to fall in March.The share of people who have looked for work in the past four weeks or are temporarily laid off, which does not capture everyone who lost work because of the pandemic. More

NEW YORK (Reuters) -U.S. prosecutors have found evidence that Russian oligarchs are trying to evade sanctions put in place to pressure Moscow to stop its invasion of Ukraine, the head of a new Justice Department task force said on Friday.Andrew Adams, a veteran prosecutor tapped to lead the “KleptoCapture” task force established last month, told Reuters in an interview that in some cases, even oligarchs who have not yet had sanctions imposed on them are trying to move assets ahead of potential future sanctions. But even as they try to hide yachts, planes or other mobile property in countries they believe to be secretive, Adams warned that oligarchs trying to evade sanctions are facing an “all-time high” level of international cooperation to track the ill-gotten gains of Russian elites. “There are efforts afoot – some of them publicly reported – to move, for example, moveable property in the forms of yachts, airplanes … into jurisdictions where, I think, people have the perception that it would be more difficult to investigate and more difficult to freeze,” Adams said. The task force’s goal is to put the finances of Russian oligarchs under strain in a bid to pressure President Vladimir Putin to cease his weeks-long assault on Ukraine.The unit’s name is a play on the word “kleptocracy,” which refers to corrupted officials who misuse power to accumulate wealth. The task force includes prosecutors, investigators and analysts from multiple federal agencies.The United States and its allies have imposed several rounds of sanctions targeting Putin, many of his wealthy friends and dozens of Russian businesses and government agencies.’SHARED SENSE OF PURPOSE’Tracing oligarchs’ assets is often difficult because they are hidden behind “layers of shell companies scattered around the globe,” Adams said.U.S. prosecutors are receiving information from places previously thought to be safe havens, Adams said. “Especially in the current context, and the current climate … the level of shared sense of purpose I think is at an all-time-high,” Adams said.He declined to provide details of specific jurisdictions that have provided the task force with information, or to name specific people under investigation. He said targeting assets located overseas was a major component of the unit’s work, adding that the United States has not been an attractive country for supporters of Putin’s government since around 2014 due to a series of sanctions over Moscow’s annexation of Crimea from Ukraine.European countries have already found and detained the yachts of wealthy Russian businessmen.Spain’s government temporarily seized the $140 million Superyacht Valerie, which has been linked to Sergei Chemezov, a former KGB officer who heads state conglomerate Rostec.France last month detained a vessel belonging to Rosneft boss Igor Sechin, while Italy sequestered a yacht owned by Russian billionaire Andrew Igorevich Melnichenko.The Justice Department said last month that information provided by U.S. law enforcement to foreign partners had contributed to multiple vessel seizures.”The United States has not been a friendly place to be parking your money as an oligarch,” Adams said. “The most ostentatious, the most obvious sorts of assets are not in the United States.”Adams cited a 2019 case in which U.S. authorities seized the Wise Honest, a North Korean cargo ship accused of making illicit coal shipments in violation of U.S. sanctions even though the vessel was initially located outside American waters, as a “playbook” for some of the task force’s future cases.LONG LEGAL FIGHTS AHEADAdams said that criminal charges and asset seizure warrants could come in the “early days” of the unit, which was also prepared for lengthy legal battles by oligarchs seeking to prevent the United States from permanently confiscating their assets through civil forfeiture. Those cases can allow the department to take ill-gotten property in cases where people are outside the country and cannot be extradited. Criminal forfeitures, meanwhile, can accompany an indictment against the property owner.”We should anticipate that extremely well-heeled litigants will take things to court. We will be engaged in litigation that will take awhile,” Adams said.The task force may also target banks, cryptocurrency exchanges or other financial institutions who help sanctions violators by turning a blind eye towards suspicious transactions. Adams said many institutions had voluntarily provided information. “The cooperation from the private sector has been already frequent.” More

Even before the £700 rise in annual energy costs for UK households landed this week, 36-year-old Leigh Sopaj was struggling to pay her bills.At the start of each week Sopaj loads £30 on to a prepaid electricity meter, but her credit is dwindling faster and faster. “I used to have £20 left around the middle of the week,” she said, “but now it’s already down to £11. The bills are just getting harder and harder to pay.”Sopaj, who lives in a suburb of Leamington Spa, Warwickshire, ranked among the 20 per cent most deprived areas of the UK, is among the 6.3mn households facing “fuel stress” according to the Resolution Foundation, a think-tank — after the number of homes affected tripled overnight.And with the UK’s energy price cap predicted to jump by another £600-£800 in October, alongside increases in council tax, inflation heading towards 8 per cent and petrol prices rising by 50p a litre since January, families are confronting the sharpest drop in living standards since records began in 1956.

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As a result, local authorities and voluntary organisations are looking for innovative ways to address a cost of living crisis that will ensnare families who would not ordinarily use emergency services such as food banks.One such scheme is the Lillington Community Pantry in Warwickshire in England’s West Midlands. “Subscribers” pay £5 to select food items from shelves stocked with surplus supermarket goods. The aim is to help householders like Sopaj stretch budgets that are being rapidly eroded.The pantry, which is run by a charity, Feed the Hungry, on behalf of Warwickshire county council, consciously differs from a traditional food bank where recipients are simply handed pre-packed bags of food. It aims to provide a “shopping experience” and a host of other preventive services from debt counselling to health advice and cookery classes, that the council hopes will help stabilise families teetering on the edge of a poverty precipice.“For a lot of people it’s a slow decline, a spiral downwards, so what we’re trying to do is catch them before they hit the bottom,” says Heather Timms, a Conservative member of the council, which has invested nearly £350,000 in the pantry.The scheme, which blends government seed money with charity knowhow and the work of volunteers, is being held up as a model of how local governments can look to harness “community power” to bolster already-stretched services. Pantry users can seek expert advice from on-site groups such as Citizens Advice, whose representative Paul Carter is available for on-the-spot consultations. “Something as simple as tips on budget planning for foreseeable financial events like birthdays and Christmas — and not promising your child what you can’t afford — can help people live within their means,” he says.The idea of expanding community involvement in delivering public services is supported by central government and was included by the levelling up secretary Michael Gove in a white paper in February, which set out the government’s prospectus for reducing inequality across the UK.The paper included a promise to try out “community covenants” in which councils, public bodies and local groups make formal agreements to “empower communities to shape the regeneration of their areas and improve public services”.Critics of the government, including Angela Rayner, deputy leader of the opposition Labour party, have said such schemes are no substitute for proper funding of local government services, which have been hit with 30 per cent budget cuts during the past decade.At a recent conference on community empowerment, Rayner, while welcoming the concept, accused the government of failing to really strengthen communities, instead favouring a “bit of money in a pot here, a little project there”. But promoters of grassroots engagement argue the sheer scale of the cost of living crisis, combined with the revival of volunteering during the Covid-19 pandemic, has created a moment to reassess the role of community in delivering services.Adam Lent, chief executive of the think-tank and local government network New Local, said the policy debate had moved on from the ideas of the “Big Society” proposed by David Cameron, former prime minister and Conservative leader.“Cameron’s ‘Big Society’ idea was that the state would take a step back and the voluntary sector would step up. This is a different concept: it says that the state is an important catalyst for change and community power,” he said.As an example, New Local cites the Wigan Deal where Wigan council in Greater Manchester has mobilised volunteers and schools to improve local parks and recycling, staff libraries and create friendship groups.Danny Kruger, a Conservative MP who was asked by the prime minister Boris Johnson to report on how to capitalise on the volunteering spirit ignited during the pandemic, believes necessity will prove the mother of invention.“We now have much more of a ‘burning platform’ than in that era of ‘Big Society’,” he said. “There is a growing understanding that we need a stronger society because the resources of the state are simply insufficient to meet the need.”Back in Lillington, the aim is that seed money that has been invested in the pantry will replicate the success of a similar scheme in neighbouring Coventry, which has more than 130 participating families.Charles Barlow, head of six “community power” projects for Warwickshire county council, including an orchard and a scheme to help the elderly remain in their own homes longer, believes demand will increase as cost pressures on families mount.Charles Barlow is looking for community buy-in to make the projects self-sustaining © Andrew Fox/FT“If it works and we get the volume of community buy-in we’re looking for, then the hope is that the project becomes self-sustaining,” Barlow said. Faye Abbott, who runs the Lillington pantry, said the hope was to create a hub around which people can coalesce in hard times, with cooking classes and activities for children with few treats in their lives.In its second week of opening, she recalled how one small boy came running in and immediately picked up a packet of Angel Delight pudding mix.

A customer, left, talking to Faye Abbott of the Lillington pantry © Andrew Fox/FT

“It was a small thing, but clearly so important to him,” she said. “This is not just about helping people on means-tested benefits. There are people working who still cannot afford to pay the bills, and that group is getting larger and larger.”For Sopaj, who cannot afford swimming lessons for her two-year-old son, Hudson, the pantry will enable her to pick up about £30 worth of food for a £5 fee. This will help her get through weekends when her teenage children come to stay. “They just eat so much,” she says. “The pantry will help to get me through.” More

(Reuters) – Federal Reserve Chair Jerome Powell worked through the weekend after Russia’s Feb. 24 invasion of Ukraine, meeting with staff on both Saturday and Sunday for the first time since May 2020 when the central bank was deep into its pandemic crisis response. Powell had two 45-minute meetings with staff on Feb. 26, including one that started at 8 p.m., and also attended an hourlong meeting at the Treasury, his monthly schedule published Friday shows. On Feb. 27 he met with staff from 10 a.m. to 2 p.m., and then again at 8 p.m.; on the Monday, the day Treasury put sanctions on Russia’s central bank and threatened more action if the war continued, Powell held another 45-minute 8 p.m. staff meeting.Though the Fed chair calendars never detail the contents of notated meetings, the flurry of work suggests the pressure on Powell to figure out the fallout for the U.S. economy from what Russia calls a “special operation” designed to destroy its southern neighbor’s military capabilities and capture what it regards as dangerous nationalists. The invasion sent world energy prices soaring just as the Fed was getting ready to begin a round of interest rates hikes to fight 40-year-high inflation. A few days after that weekend of work, Powell told lawmakers on Capitol Hill that the near-term effects of the invasion, the war, the sanctions, and of events to still to come “remain highly uncertain,” but he signaled the Fed’s rate increases would go ahead as expected. More

WASHINGTON (Reuters) – U.S. employers maintained a brisk pace of hiring in March, driving the unemployment rate to a new two-year low of 3.6% while also boosting wages, resulting in a further tightening of labor market conditions and opening the door to a hefty 50 basis points interest rate hike from the Federal Reserve in May.The Labor Department’s closely watched employment report on Friday also showed more people joining the workforce, likely attracted by the higher wages. Employment in professional and business services, financial activities and retail sectors is now above pre-pandemic levels. The 11th straight month of job gains in excess of 400,000 underscored the economy’s resilience even as growth appears to have slowed considerably in the first quarter under the weight of high inflation amid snarled supply chains.”Despite concerns about inflation and the Russia-Ukraine war, American businesses are still hiring at full throttle, while more people are returning to the labor force,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.”That’s great news for the economy. However, the labor market is only getting tighter and wages are on a clear upward track, fanning the inflation flames. The Fed has every reason to go big or go home on May 4.”The survey of establishments showed that nonfarm payrolls increased by 431,000 jobs last month. The economy created 95,000 more jobs in January and February than initially estimated. Nonfarm payrolls https://graphics.reuters.com/USA-STOCKS/movanbdwmpa/nfpr.pngOverall employment is now 1.6 million jobs below its pre-pandemic level, with many economists predicting all the jobs lost will be recouped by July. Economists polled by Reuters had forecast payrolls increasing 490,000 in March. Estimates ranged from as low as 200,000 to as high as 700,000.Worker demand is being driven by a sharp decline in COVID-19 infections, which has resulted in restrictions being lifted across the country. There is no sign yet that the Russia-Ukraine war, which has pushed gasoline prices above $4 per gallon, has impacted the labor market.President Joe Biden welcomed the upbeat report saying more people working could help to ease the pressure on supply chains.”That’s good news for fighting inflation,” Biden said. “It is good news for our economy, and it means that our economy has gone from being on the mend to being on the move.” The broad increase in payrolls was led by the leisure and hospitality industry, which added 112,000 jobs. Professional and business services payrolls increased by 102,000 jobs, hoisting employment in the sector 723,000 above its pre-pandemic level.Retailers added 49,000, pushing the level of employment 278,000 higher than in February 2020.Jobs by industry Jobs by industry https://graphics.reuters.com/USA-FED/INDUSTRY/qmypmdoolvr/chart.pngFinancial activities employment grew by 16,000 and is now 41,000 above its pre-pandemic level. Manufacturing payrolls increased by 38,000 jobs and is yet to recoup all the jobs lost during the pandemic. Construction employment is now back at its pre-pandemic level, with 19,000 jobs added in March.Stocks on Wall Street were lower. The dollar gained versus a basket of currencies. U.S. Treasury yields rose, with the closely watched yield curve between two-year and 10-year notes inverting for the third time this week amid concerns that tight monetary policy could tip the economy into recession.The Fed last month raised its policy interest rate by 25 basis points, the first hike in more than three years. Policymakers have been ratcheting up their hawkish rhetoric, with Fed Chair Jerome Powell saying the U.S. central bank must move “expeditiously” to hike rates and possibly “more aggressively” to keep high inflation from becoming entrenched.RECORD JOB OPENINGSWith a near record 11.3 million job openings on the last day of February, payrolls growth could remain strong this year.Job gains averaged 562,000 per month in the first quarter. But inflation is eating into growth, with gross domestic product estimates for the January-March quarter mostly below a 1.0% annualized rate, a sharp slowdown from the fourth quarter’s brisk 6.9% pace.Annual inflation rose in February by the most in 40 years. Despite the anxiety in the bond market, economists expect the expansion to continue. Many viewed the Fed’s massive holdings of Treasuries and mortgage-backed securities as distorting the yield curve moves.Some noted that real yields remained negative, while others argued that the two-year/five-year Treasury yield curve was a better indicator of a future recession. This segment has not inverted.”The amazingly strong job gains this year point to a solid economy,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “What we are likely seeing is a deceleration back toward more normal levels of growth after having posted clearly unsustainable robust numbers.”  The labor pool continued to steadily expand in March.The household survey, from which the unemployment rate is derived, showed 418,000 entered the labor force last month. About 249,000 women, 20 years of age and older, joined the workforce. That was more than offset by a 736,000 surge in household employment. As result, the unemployment rate dropped two-tenths of a percentage point to 3.6%, the lowest since February 2020.Unemployment declined for all race groups, with a large decline among Blacks. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to a two-year high of 62.4% from 62.3% in February. The participation rate for the prime age group also rose to a two-year high of 82.5% from 82.2% in February.Labor market participation https://graphics.reuters.com/USA-STOCKS/xmvjoqenmpr/participation.pngAccording to a report from global outplacement firm Challenger, Gray & Christmas on Thursday, the skyrocketing cost of living was “causing workers who were depending on savings or investments to seek out paid employment.”There was a significant reduction in those experiencing long spells of unemployment as well as those being unable to work because of the pandemic. With workers still scarce, average hourly earnings increased 0.4% after edging up 0.1% in February. That lifted the annual increase to 5.6% from 5.2% in February. But the workweek shortened to 34.6 hours from 34.7 hours in February. More

The Biden administration has insisted western sanctions against Russia are working despite a rebound in the value of the rouble against the US dollar.Speaking to reporters, a senior US Treasury official said the administration believed the real value of the rouble was deeply impaired, citing Russia’s skyrocketing inflation and the depreciated exchange rate for the currency on the black market.The rouble on Friday was trading at roughly 86 to the US dollar in the interbank market after plunging to as much as 150 to the dollar in early March. Its current value against the dollar is not far from the level on February 23, the day before Vladimir Putin, Russia’s president, launched the invasion of Ukraine.However, the rouble is not functioning as a convertible currency, after sanctions resulted in a collapse in goods and services imports with businesses and consumers largely unable to buy products on international markets or travel outside of the country. Economists have attributed the rebound on interbank markets to Moscow’s stringent currency controls, which have prevented Russians from moving money to foreign bank accounts or taking significant amounts of cash out of the country. Moscow has also temporarily banned banks and brokers from operating cash-based foreign exchanges for dollars and euros.The Treasury official noted inflation in Russia had jumped 6 per cent over the past three weeks, while western central bank sanctions had prevented the country from accessing half of its foreign currency reserves, cutting off access to a cushion it had been building to lessen the blow of punitive measures. Karl Schamotta, chief market strategist at Corpay, said: “The information content in the exchange rate right now is not the same as it is in any other major economy. The fact is that we have created a one-way valve: money is flowing into Russia but not out. And that is going to force the exchange rate up over time,” he said.“The black market is quoting anywhere between 110 and 140 on dollar/rouble transactions. So citizens who are looking to purchase dollars or euro are paying a much higher cost than we’re seeing on the interbank market.”Schamotta added: “Clearly the sanctions that have been applied have been taking a toll on the real economy, on the non-energy, non-commodity economy and are imposing enormous costs on households.”In the call with reporters, the Treasury official said the US believed it still had the ability to expand sanctions in the future, as the EU continued to reduce its reliance on Russian energy imports and other raw materials. The official said the US had designed the sanctions to maximise the disruption to Russia’s military invasion of Ukraine, while simultaneously trying to minimise the negative impact on the global supply chains and the EU in particular.As such it was more important for the US, EU and UK to be united on sanctions, making it harder for Russia to circumvent the restrictions, rather than Washington imposing the harshest measures possible, the official said. More

PARIS — Soaring energy and food prices driven by Russia’s continued aggression against Ukraine pushed inflation in Europe last month to levels not seen in four decades, with prices in the 19 countries that use the euro soaring 7.5 percent, according to data released Friday by Europe’s statistics agency.The unprecedented run-up in prices from already record levels was the latest marker of just how rapidly the impact of the war in Ukraine is coursing through Europe’s economy, putting pressure on the European Central Bank to begin raising interest rates, possibly before the end of the year.“The rate of inflation has once again come in considerably higher than we expected,” Joachim Nagel, the president of Germany’s Bundesbank, said on Twitter. “Monetary policy should not pass up the opportunity for timely countermeasures.”Surging energy costs have posed the biggest threat, causing a sharp spike in costs for European businesses and households and lashing Europe’s economic rebound from the Covid-19 pandemic. Energy prices rocketed nearly 45 percent in March from a year earlier, as the conflict has caused​​ dizzying jumps in natural gas, electricity and oil prices.Europe and the United States are making ambitious plans to reduce reliance on Russian energy to offset the threat to the European economy and energy security. Last week, the United States agreed to increase shipments of natural gas to help wean Europe off Russian energy.Germany, the biggest user of Russian energy in Europe, is also aiming to slash in half its imports of Russian oil and coal this year, and end its dependence on Russian natural gas by the middle of 2024. Europe’s largest economy, Germany is already suffering an economic blow from the crisis. The German Council of Economic Experts, which advises the government in Berlin, this week slashed its forecast for growth in 2022 by more than half, to 1.8 percent.Adding to the economic strain on Europe are surging food costs, as supplies of wheat, corn and barley remained trapped in Russia and Ukraine, which produce a major portion of those crops for world consumption.Prices for unprocessed food rose at an annual rate of 7.8 percent last month, Eurostat said. Since the invasion, global wheat prices have increased 21 percent, barley 33 percent and some fertilizers 40 percent, threatening a food crisis.Even without food and energy, core inflation in the eurozone also continued to rise as inflation in goods and services accelerated.The biggest overall increases were recorded in Lithuania (15.6 percent), Estonia (14.8 percent) and the Netherlands (11.9 percent). Consumer prices in Germany leaped 7.6 percent compared with last year, and 9.8 percent in Spain.Christine Lagarde, president of the European Central Bank, expects food and energy prices to stabilize at high levels.Iakovos Hatzistavrou/Agence France-Presse — Getty ImagesOn Wednesday, the central bank’s president, Christine Lagarde, said she expected food and energy prices in the eurozone to stabilize at high levels, allowing the area to avoid falling into a quagmire of high inflation and stagnant growth. The bank recently announced plans to scale back some of its bond-buying stimulus measures.But analysts say much more pain lies ahead, as the war keeps upward pressure on prices and persistently high energy costs reverberate through the economy. The Kremlin’s threat to cut off European supplies of Russian oil and gas unless payments are made in rubles has raised the specter of even higher energy costs.Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a note to clients that should Russia cut off gas to Europe, prices would soar, although Moscow was unlikely to take this step. A cease-fire agreement between Russia and Ukraine, if one is reached, would send energy prices tumbling.But governments around Europe are taking no chances, pledging billions of euros in subsidies to shield businesses and households from the pain of surging energy bills that have hurt consumer purchasing power.“Households are becoming more pessimistic and could cut back on spending,” Ms. Lagarde said in a speech in Cyprus on Wednesday. “The longer the war lasts, the higher the economic costs will be and the greater the likelihood we end up in more adverse scenarios.”Denmark is earmarking 2 billion Danish crowns ($299 million) to spend on “heat checks” for over 400,000 hard-hit households. France is capping an increase on regulated electricity costs at 4 percent and is spending a total of 26 billion euros to help companies and households offset higher gas and power bills.In Germany, where the war in Ukraine and inflation have also put significant pressure on consumer sentiment, Chancellor Olaf Scholz’s government has approved €4.5 billion in tax relief measures.The war has also added to the strain on supply chains that were already stretched by the pandemic, continuing to press on producer prices and the cost of goods for consumers.“The question is whether the worst is behind us now, and that seems doubtful,” Bert Colijn, a senior eurozone economist at ING Bank, wrote in a note to clients, adding that the prospect of double-digit inflation “cannot be ruled out at this point.” More