It was March 30, nearly a month after the Russian invasion of Ukraine began. The President of the European Central Bank said that “the longer the war lasts[it]the economic costs ser[aient] higher and the more the probability of an unfavorable outlook will be[it] grande ».
“With an appropriate policy response, we can mitigate the economic consequences of war and manage the high levels of uncertainty we face”estimated, at the same time, Christine Lagarde.
Then defining “stagflation” as “a recession in the economy on a lasting basis and high inflation, which continues to rise”, the boss of the ECB considered that the latter could be avoided.
“The current situation cannot be compared to that of the 1970s”
“Although the unusual degree of uncertainty could mean a combined slowdown in growth and high inflation, the current situation cannot be compared to that of the 1970s”, she reaffirmed, this May 7, to the Slovenian daily.
The scenario of « stagflation » is not “not currently our reference” continued Christine Lagarde. Admittedly, the oil shock had also caused the economy to collapse, but inflation was much higher than at the moment. Especially since, unlike fifty years ago, “we do not see (…) today” wage increases in response to inflation.
This war “is above all a human tragedy” who also has “economic consequences beyond Ukraine” : elle “weighs on growth and fuels inflation”, insisted the former Minister of the Economy of Nicolas Sarkozy.
The European economy is “de facto stagnating”, says another
It also does not say whether the European institution located in Frankfurt, Germany will raise its key rates. And even if there is a timid growth of 0.2% in the first quarter of 2022, the European economy “de facto stagnant”, said Fabio Panetta, member of the Executive Board of the ECB, in an interview with the Italian daily The print May 5th.
This context of sluggish growth and rising prices “complicates choices” guardians of the euro, because “monetary tightening aimed at containing inflation would end up curbing already weakened growth”, predicted the latter, ranked among the “doves” adept at a policy supporting the economy, in opposition to “hawks” who are in favor of an unaccommodating policy.
Remarks which contrast with those more proactive of two of the most eminent members of the executive board of the European Central Bank, underlining the divergences of appreciation within it. “A rate increase is in my opinion possible in July”, had supported Isabel Schnabel in a daily interview Handelsblatt released May 3.