ROMA (ITALPRESS) – “In the current geopolitical landscape the Governing Council stresses the urgent need to strengthen the euro area and its economy. Governments should give priority to the sustainability of public finances, strategic investments and structural reforms that promote growth.” This is what the ECB underlines in the economic bulletin, pointing out that “to make full use of the potential of the single European market remains fundamental. It is also of crucial importance to promote greater integration of capital markets by bringing to completion the union of savings and investments and banking union, according to an ambitious timetable, and to adopt quickly the regulation on the establishment of the digital euro”.
According to the ECB, “the euro area continues to face a changing world political context. A new increase in uncertainty could affect demand as well as a deterioration in the climate of trust in the world’s financial markets.”.
So “more frictions in international trade could cause disruptions in supply chains, reduce exports and weaken consumption and investments. The geopolitical tensions, in particular the unjustified war of Russia against Ukraine, remain among the main sources of uncertainty. On the other hand, the planned expenditure on defence and infrastructure, together with the adoption of reforms aimed at improving productivity and the use of new technologies by the euro area companies, could support growth more than expected, even through the positive effects on the confidence of enterprises and consumers. New trade agreements and greater integration of the single market could also stimulate growth beyond current expectations. The prospects for inflation remain more uncertain than usual because of the changing world political context. Inflation could be lower if, due to duties, the demand for export of the euro area was reduced more than expected and if countries with excess capacity increased their exports to the area further.”.
“In addition, a strengthening of the euro could bring down inflation beyond current expectations. Even more volatile financial markets and risk warnings could weigh on demand and thus reduce inflation. Conversely, inflation could be higher if energy quotations increased persistently or if more fragmented world supply chains pushed import prices to rise, reduced the offer of critical raw materials and increased the constraints of productive capacity in the euro area economy. If wage dynamics were slower, service inflation could be reduced later than expected. The planned increase in defence spending and infrastructure could also increase inflation in the medium term. Extreme weather events, and more generally the unfolding of the climate and environmental crisis, could determine increases in food prices higher than expected,” he concluded.
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(ITALPRESS).
