Publisher | Turn in monetary policy

months ago, the European Central Bank (ECB) It had been proposed to pave the way for the gradual rise in interest rates, and accompany a recovery that was intuited with the end of the pandemic. The rise in electricity prices he gave an initial voice of alarm that this was not going to be as easy as expected. The year 2022 began with geopolitical tensions on several fronts and with the specter of inflation knocking on the door, and the bursting of the ukrainian war –and its economic effects beyond the battlefield– has ended up convincing the body chaired by Christine Lagarde that a change of script was necessary. Europe’s dependence on Russian oil and gas has made these raw materials more expensive, with consequences that European citizens have already noticed in their shopping basket. The price of gasoline and other raw materials are at record highs, companies have seen their energy bill skyrocket and fear – Pimec and Foment have warned – closures and the loss of hundreds of thousands of jobs. There is little hope that the scenario of expensive oil will dissipate, so, given inflation that was already at extremely high levels in February (5.8% in the euro zone, and in Spain even higher: 7.6%) the ECB was obliged to act. Forced in the literal sense of the term, since the central bank’s mandate is to control prices. It will not be easy.

Two great pressures seem to pull in opposite directions at the moment. On the one hand, the escalation of inflation; on the other, the fear of a recession due to the war in Ukraine. The ECB must walk like a tightrope walker on the thread so as not to cause imbalances in the economies of European countries. The manuals say that to contain inflation it is good to raise interest rates. The ECB has also kept them at 0% since 2016. But if the price of money rises, the credits will be more expensive, for individuals, for private companies and also for states when it comes to financing their public debt. Bad business if there is no robust economic growth. So, before putting a date on the feared rate hike, Lagarde confirmed that the ECB will reduce the massive purchase of debt. He had already announced it in December, but now he has shortened the times: the tightening of the measures has accelerated. Thus, in the third quarter of this year we could be facing the withdrawal of monetary stimuli, which would be followed by a possible rise in interest rates.

Spain has cause for concern. It is one of the European countries that have benefited the most from the expansionist policy to face the high public spending derived from the pandemic (the ertes, for example). And the frequent episodes of friction both within the coalition government and between it and the PP, the first opposition party – in the absence of seeing how Alberto Núñez Feijóo positions it from now on – could make the Executive face this new political weakness. economic stage. In a message to governments, Lagarde encouraged them to adopt fiscal measures to counteract the effects of the ECB’s decisions. That is, more public spending. Entrepreneurs also demand actions, where appropriate, to limit the price of energy. Difficult situation in a country with one of the highest levels of public debt and deficit of the European Union.

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