will take place some time after the end of our net purchases under the app and will be gradual. and third, flexibility means that we will use our toolkit to ensure that our policy is transmitted evenly across all parts of the euro area. conclusion let me conclude. europe is entering a difficult phase. we will face, in the short term, higher inflation and slower growth. there is considerable uncertainty about how large these effects will be and how long they will last for. the longer the war lasts, the greater the costs are likely to be. at the same time, europe ’ s recent history shows that, with each crisis, we have learned the right lessons and emerged stronger. that was true after the sovereign debt crisis and the pandemic, and all the signs suggest that the russian invasion will be a turning point for europe, too. in that vein, we can be inspired by the example of cyprus and the spirit of its people. your 4 / 5 bis central bankers'speeches country has demonstrated time and again that it is agile and resilient, and that it can turn crises into opportunities. i am confident that it will do so again. you have proven the truth of the philosopher epictetus ’ famous words : “ it ’ s not what happens to you, but how you react to it that matters ”. 1 european commission ( 2020 ), “ study on the eu ’ s list of critical raw materials – final report ”. 2 this figure reflects the latest gdp release in march 2022. 3 according to eurostat, cyprus ’ energy import dependency ( calculated as net imports divided by gross available energy ) stood at 93 % in 2020. 4 in the five largest countries. 5 international energy agency ( 2021 ), “ the role of critical minerals in clean energy transitions ”. 6 from the european climate, infrastructure and environment executive agency. 7 lagarde, c. ( 2022 ), “ monetary policy in an uncertain world ”, speech at “ the ecb and its watchers xxii ” conference, frankfurt am main, 17 march. 5 / 5 bis central bankers'speeches

than after previous recessions. for example, from the onset of the great financial crisis, it took seven years for euro area gdp to return to its pre - crisis level and almost 12 years for unemployment to do the same. this time, gdp had already surpassed its pre - crisis level at the end of last year. unemployment in the euro area has reached a record low and is at levels not seen since the 1970s. cyprus has shared in this strong recovery dynamic. gdp grew by 5. 6 % last year, returning to its 2019 level. unemployment has also returned to its pre - crisis level of around 6 %. this strong performance owes a lot to the exceptional policy response in the euro area, where fiscal and monetary policy worked hand - in - hand to protect incomes and demand. however, it has 1 / 5 bis central bankers'speeches not been so easy to restart supply after the lockdowns triggered by the virus. that has caused a global mismatch between surging demand and constrained supply, leading to shortages and supply chain disruptions. given the interconnectedness of the world economy, this has cascaded across markets, creating strong inflationary pressures. since june last year, for example, energy and food have accounted for, on average, around twothirds of inflation in the euro area. this reflects, in part, the decision by opec + to cut oil supply by 9. 7 million barrels per day in 2020, followed by the failure of some members to return supply to its previous levels. that has in turn contributed to the rising price of natural gas, which has flowed into food prices, by making fertiliser more expensive, and into the prices of energyintensive industrial goods. these spillover effects across markets have led inflation to reach 5. 9 % in the euro area at the last reading, with energy inflation above 30 %. cyprus has seen similar price pressures, with inflation rising by 5. 8 % – driven mainly by higher energy and food prices ( 26. 2 % and 6. 8 %, respectively ). we had been expecting these disruptions to ease as economic conditions returned to normal after the pandemic. however, the russia - ukraine war has now introduced considerable uncertainty into the outlook for the economy. the economic uncertainty created by the war the economic impact of the war is best captured by what economists call a “ supply shock ”, which is a shock that simultaneously pushes up inflation and reduces growth. three main factors are likely to