It is a rare agreement, but Christine Lagarde succeeded: after asking Marcelo Rebelo de Sousa for “care”, it was António Costa’s turn yesterday to criticize the monetary policy of the European Central Bank (ECB), leaving the warning that, when the diagnosis is missed, it is difficult to get the therapy right. And when the President of the Republic and the Prime Minister agreed on their concerns about the continuity of the policy of rate hikes, they were even joined by the leader of the largest opposition party, with Luís Montenegro criticizing Lagarde’s view that inflation is the result of the increase in wages.
Last Tuesday, Christine Lagarde stated during the opening speech of the ECB Forum in Sintra that she will continue to raise interest rates in July and insisted that “it is unlikely that the central bank can confidently declare that the maximum rates have been reached in the foreseeable future”. The president of the ECB was particularly concerned about the risk of an inflationary wage spiral. Yesterday, at the entrance to the European Council meeting in Brussels, António Costa contradicted this view. “I think the ECB has not sufficiently understood the specific nature of the inflationary cycle we have been through, nor is it taking into account the sectors that have fueled this inflationary tension,” the prime minister said, recalling that “today it is more or less clear that the increase in extraordinary profits in particular has contributed more to maintaining inflation than to wage increases”. And “not understanding the specifics of this inflationary cycle” is a problem because it “greatly limits the ability to cope” – “If we don’t get the diagnosis right, the therapy rarely gets it right”.
It is not the first time that the leader of the Executive has criticized the monetary policy of the European Central Bank. “The ECB hardly continues with the policy of raising rates, no matter who hurts”António Costa had already declared last March, days after another rate hike of 50 basis points.
Without mentioning Lagarde, Marcelo Rebelo de Sousa had already defended this week that “central banks should be very careful about what they say in public”. “This is having a disruptive effect on people, economies and markets that is not good for anyone”, argued the President of the Republic. Marcelo declined to comment on Lagarde’s link between pay increases and inflation (“I didn’t want to do what I don’t think is a good idea to do”), insisting that “what is required of governments and political authorities, all of them, and from central banks, you are very careful in your speech because it is very sensitive to people’s daily life”.
The leader of the PSD came by yesterday to criticize Lagarde’s association between wages and inflation. “I want to say that we do not agree with the position of the ECB, in particular of Ms Lagarde, regarding wage growth in Portugal. we do not follow [a ideia de] that the fight against inflation may be at stake because of the rise in wages,” defended Luís Montenegro, also in Brussels, where he took part in a rally of the European People’s Party (PPE).
A discordant voice was that of socialist Francisco Assis, president of the Economic and Social Council (CES), who said yesterday that the ECB “must be fully respected” as Portugal needs to adjust to interest rate hikes. “Too often politicians make statements that are more consistent with concerns of temporary popularity than they help solve real problems. I won’t go into that,” replied Lusa, the president of CES, during a visit to Cape Verde.
Upon joining the European Council, António Costa also defended a permanent mechanism for stabilizing crises in the European Union, classifying the proposals for the revision of the long-term budget and fiscal rules as “insufficient”. “It’s not about Portugal’s interest, it’s about Europe’s interest, both proposals are totally inadequate,” the executive leader insisted. With Lusa
Source: DN
