The ECB Council came to this assessment at its most recent meeting, it emphasized on Monday at a money market conference. “If material shortages and increased energy prices persist, they could slow down the economic recovery.” At the moment, however, the economy in the euro area is still largely running smoothly. According to the head of the Euro Group, Paschal Donohoe, the economic recovery is even intensifying. In the next year it will be even stronger. Many countries could then return to pre-crisis levels.
However, the European finance ministers would also talk about risks such as inflation and supply chain problems during their deliberations this Monday and Tuesday in Brussels. Resolutions are not expected, as insiders told Reuters.
According to the European Central Bank, the economy in the euro zone is still recovering from the corona crisis. However, “the momentum” has weakened somewhat, said ECB President Christine Lagarde after the latest interest rate meeting. Consumer spending is still strong. However, bottlenecks in raw materials, intermediate products and labor slowed the recovery, especially in industry.
Lane defends loose line
The European Central Bank (ECB) is worried that the bottlenecks resulting from the Corona crisis could fuel inflation more than expected. There are currently shortages in semiconductors, for example, which are used in many products. But there are also problems with steel, plastic and wood. According to Lane, if the shortage causes wage increases to be stronger than expected, price pressures could increase.
Inflation in the euro area rose sharply in October than it had been in over 13 years. Driven by a sharp rise in energy costs, consumer prices rose by 4.1 percent within a year. However, the ECB assumes that the inflationary surge will subside in the coming year. Therefore, tightening monetary policy at this point in time would be counterproductive, Lane emphasized.
The economy in the euro zone recovered after the height of the Corona crisis and increased its rate of growth slightly in the summer. From July to September the gross domestic product (GDP) increased by 2.2 percent. But the lack of material is causing problems for companies, as the IHS Markit institute found in its survey of purchasing managers in October. Supply problems caused production stoppages and fewer orders. The companies looked ahead more skeptically than they had done for a year. More and more companies complained about the delivery situation and the effects of rising costs and prices.
(Reuters)
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