2023-04-25 04:30:41
Philip Lane is chief economist of the European Central Bank (ECB) and one of the six members of its executive board. Although classified in the camp of the “doves”, he openly calls for a further rise in interest rates in May, believing that the fight once morest inflation is far from over. It also asks governments to reduce their aid to gas and electricity bills, which fuel the rise in prices.
In the fall, a recession in the euro zone seemed inevitable for the beginning of this year. Finally, was it avoided?
Yes, the indicators show that the European economy has progressed during the first months of the year. The main change has been lower energy prices, especially gas, and the easing of bottlenecks. This has led to a visible improvement in consumer and business confidence.
This projection remains reasonable. But allow me to insist on the very strong uncertainties that remain: many questions arise on the state of the world economy, on the war waged by Russia once morest Ukraine… It is important to remember the magnitude of the challenges facing Europe and the global economy. After quite a long period of falling gas prices, the weather may change, the war may get even worse, or OPEC policy may continue to fluctuate… All of this might drive up energy prices. .
In March, the ECB announced a eurozone growth forecast of 1% for this year. Is this still the current trend?
In addition, central banks around the world have raised interest rates, which was necessary, but there is a lot of uncertainty regarding the impact of this policy, whether it will allow a soft landing of the global economy or whether there is a risk that this will translate into a decline in economic performance.
In short, it’s a little better than expected, but the economy remains almost stagnant…
Not stagnant but, compared to what we expected before the pandemic and before Russia’s war on Ukraine, the European economy is currently on a much more modest trajectory.
On the positive side, unemployment in the eurozone remains low at 6.6%. Is this also partly the explanation for the resistance of the European economy?
It’s good news. The worst case scenario for many people is losing their job. A solid labor market is therefore an important confidence factor for consumption. It should be noted that the strength of the labor market is due to a strong comeback of immigration in the euro zone. There were fears of a decrease in labor immigration following the pandemic, but it seems to be back. This provides a workforce for all industries that are facing staff shortages. In addition, the participation rate of older workers has made good progress. The development of telework has also enabled many people to join the labor force. All this allows the supply of labor to increase and this is the reason why we can have a strong labor market without necessarily overheating wage pressure.
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