US-Iran standoff threatens EU with political crisis — newspaper

BRUSSELS, April 27. /TASS/. European leaders are feeling mounting pressure as the US-Iran standoff risks shifting from an economic shock to a political crisis for the "fragile center" of the European Union, Politico reported, citing sources. Amid rising energy prices and slowing economic growth, EU governments are preparing, according to the publication, for a crisis they can hardly contain – one that could undermine the bloc’s "already weakened political mainstream." "Energy costs are cascading into food, transport and housing, hitting lower-and middle-income households hardest," Seamus Boland, president of the European Economic and Social Committee, which brings together trade unions from across Europe and advises the European Commission on economic and labor policy, told the newspaper. "Politically, that creates space for distrust – not just of national governments, but of European institutions’ ability to shield citizens from external shocks. It risks accelerating support for more protectionist or inward-looking approaches," Boland noted. According to European Commissioner for Economy Valdis Dombrovskis, the consequences of the blockade of the Strait of Hormuz are "becoming more pronounced" and "spreading throughout the broader economy." Fiscal capacity "is now more limited already since Covid-19 and since the first energy crisis," he said. Earlier, Dombrovskis warned that EU countries could face stagflation – high inflation combined with low GDP growth and unemployment. An updated EU economic forecast is due in May. Before the start of US and Israeli military operations against Iran, the European Commission projected GDP growth of 1.4% for 2026 and inflation of 2%. The latest estimates suggest that if energy prices return to pre-war levels by the end of 2026, GDP growth would be at most 0.4 percentage points below the current forecast. If oil and gas prices remain elevated, the EU economy would grow by no more than 0.8% this year. In the first scenario, inflation is projected at 3%; in the second, at 4.5%.