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Inflation: Medina defends “narrow path” in the face of fears of recession

Finance Minister Fernando Medina today defended a “narrow path” to combat inflation, admitting that current levels are “a central problem” in Europe, at a time of fears of economic recession in the euro zone.

“The two issues are linked. It is natural that the finance ministers express their position of prudence, of caution. Central banks are responsible for managing monetary policy and, today, inflation is a central problem in Europe and in Portugal as well,” said Fernando Medina, speaking on the second day of an informal meeting of the finance ministers of the EU in the framework of the Czech Presidency of the Council in Prague.

After the governments of the euro zone admitted on Friday that the war in Ukraine and the energy crisis increased the risk of recession, the Portuguese minister defended “a narrow path that must be followed from a strategy of reducing inflation, when a An important part of the effect of inflation, by the way, is not derived from the circumstance of internal demand in the European Union, but is derived from energy prices”.

“It is understood that there is a need for action here, but it is clear that action has to be balanced against what will happen from an economic point of view,” he added.

For Fernando Medina, the euro countries must therefore follow “a path between these two sides, between what happens on the economic side and what happens with inflation.”

And he warned: “If we don’t tackle inflation now, it will be harder to tackle later.”

Eurozone governments have admitted that the war in Ukraine has increased the risk of recession, but rule out that the economy is inevitably doomed and promise to take steps to combat inflation and mitigate its impact.

“The risk has increased, but the recession is not inevitable,” said the president of the Eurogroup, Paschal Donohe, and the European Commissioner for Economy, Paolo Gentiloni, at a press conference after the first day of the informal meeting of economy ministers. and Eurozone Finance in Prague, which focused on how to respond to the Ukraine war crisis.

The rise in energy prices, aggravated by the invasion, pushed inflation in the euro zone to a record 9.1% in August and forced growth forecasts for the 19 countries to be lowered, to the point that the European Central Bank anticipated a recession in the event of a complete cut of Russian gas.

In addition to fiscal and monetary policy, the euro countries have already agreed that the solution to the energy crisis must go through intervention in the markets, something that the energy ministers also discussed on Friday in Brussels, where measures began to be designed to provide of liquidity to energy companies or limit the profits of companies that produce energy at low cost.

Source: Observadora

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