Oct 6, 2023 at 10:58 PM Update: an hour ago
The loose budgetary policies of many euro countries are thwarting the efforts of the European Central Bank (ECB) to reduce inflation. This was said by Klaas Knot, president of De Nederlandsche Bank (DNB) and ECB board member, at a meeting in Slovakia.
Central banks are faced with government budgetary policies that are “completely out of step” with the economic situation, says Knot. “There is reluctance to help stabilize the eurozone economy.”
Central bankers are more often critical of the financial support that governments provided to households and companies because of high energy prices. The money would have been distributed too broadly across the population.
These measures came at the same time that the central bank wanted to ensure that less money flowed into the economy by raising interest rates to slow inflation.
Knot’s colleague Boštjan Vasle, governor of the Slovenian central bank, complained that governments seem to want to work with increasingly generous budgets for almost four years.
‘Eurozone possibly in recession’
His Slovak counterpart, Peter Kažimír, stated that nowadays finance ministers mainly want to spend money. “I feel that we are missing the generation of ministers from the period of austerity,” said Kazimir, who was himself responsible for Slovak finances between 2012 and 2019.
The ECB has raised interest rates to record levels over the past year and a half to curb inflation. These higher borrowing costs also weigh on economic growth. Board member Isabel Schnabel said in an interview with a Croatian newspaper that she cannot rule out that the euro zone will end up in a recession as a result.
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2023-10-06 20:58:28
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