The Portuguese prime minister on Saturday urged the European Central Bank (ECB) to be cautious in the line of “normalizing monetary policy” to fight inflation, and warned that a recession will worsen the social situation in Europe.
On Thursday, the ECB’s Governing Council decided to raise the benchmark interest rates in the eurozone by 75 basis points – the second consecutive increase of this magnitude after the rise in September (and 50 points in July), which pushed the deposit rate to 1 .5% and the refinancing rate to 2%, the highest level since July 2008.
“The ECB is independent [dos governos] and we have to respect that independence, which doesn’t mean we don’t have an opinion about it.” António Costa stated, during a joint press conference with the French Prime Minister, Elisabeth Borne, in Palácio Foz, in Lisbon.
In the presence of journalists, the Portuguese Prime Minister urged the ECB to “act with caution in the normalization of monetary policy”.
“It is necessary to understand the specific nature of the inflation shock we are experiencing, which is the result not of an exponential increase in demand, but of a significant decrease in supply.19 and which was exacerbated by the war Russia waged against Ukraine unleashed, causing an energy crisis on a global scale and that is of course reflected in our economies,” said António Costa.
The Portuguese Prime Minister said he accepted that “the priority must be for everyone to reduce inflation as quickly as possible”.
“But it is important to maintain a balance between monetary policy efforts to contain inflation and avoid the risk of a recession. A risk that the social situation would certainly worsen and the supply available to satisfy the economies could endanger even further,” emphasized António Costa.
As for the functioning of the institution headed by the French Christine Lagarde, the French Prime Minister opted for a short answer, but noting that he “broadly shares the point of view” previously presented by António Costa.
“The primary aim of the action is to reduce inflation and stem the rise in energy prices. The ECB is acting within the framework of its independence, but any government may find that a balance has to be struck between the response to the phenomenon of inflation and not have an undue impact on the economy. This is a widely shared concern in Europe,” said Elisabeth Borne.
Source: DN
