Europe's Risk as Red Sea "Rises" Because of Houthi

The European economy faces serious challenges in 2023, with high inflation, rising interest rates and recession as well as high gas and electricity prices due to the energy crisis following the Russia-Ukraine conflict.

Although the inflation rate in the Eurozone has fallen closer to the European Central Bank's (ECB) target of 2% as the year has ended, the measures taken have caused economic stagnation and demand to fall sharply in Europe.

Worse, attacks on shipping lanes in the Red Sea – a vital waterway that carries 12% of world trade – could reverse recent efforts to curb inflation in Europe, economists warn.

In apparent response to Western support for Israel, Houthi forces in Yemen have targeted ships they believe are European and/or American, with the latest incident occurring on December 26.

More than 200 ships have reported problems in the past month, with about 180 vessels forced to change course, according to Gokcay Balci, associate professor of logistics and supply chains at the University of Bradford in the UK. The diversions away from the Red Sea and Suez Canal have led to significant increases in transit times.

World - Europe's risk as the Red Sea — Houthi commandos land on the Israeli-linked cargo ship Galaxy Leader, November 19, 2023. Photo: Euronews

Economists now fear that the attacks could cause long-term financial chaos, Britain's The Times reported on December 26, as global markets saw oil prices surge during the Christmas week.

“The risk of a new wave of cost-push inflation has increased significantly,” Maartje Wijffelaars, senior economist at Rabobank, a Dutch multinational banking and financial services company, warned of the potential impact on the eurozone.

In the UK, Sarah Breeden, deputy governor for financial stability at the Bank of England (BOE), issued a similar warning, saying the BOE had factored the attacks into its economic forecasts.

“This is a volatile situation that has only just emerged, but we have highlighted and included in our latest forecasts the risks to inflation from developments in the Middle East,” said Breeden.

The Houthi attacks are one of the latest international crises linked to the latest wave of conflict between Israel and the Palestinian Islamist movement Hamas in the Gaza Strip.

European leaders have struggled to come up with a coordinated response to the attacks, with several EU member states pulling out of a recent joint maritime task force aimed at stopping the Houthis before they could act.

Other attempts to pool the EU's collective strength against terrorists have also failed, with Spain openly expressing doubts that the problem could be solved by Operation Atalanta, the bloc's anti-piracy force in Somalia.

Spanish Prime Minister Pedro Sánchez said the force “does not have the characteristics or the nature needed for the Red Sea.” “We are ready and open to considering such an anti-piracy operation, but not within the framework of Operation Atalanta,” he said .

Minh Duc (According to Brussels Signal, Anadolu)

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