VSThis time, it was the Portuguese, Italian and Spanish governments which, in less than two weeks, voiced strong criticism against the European Central Bank (ECB). While the European monetary institution is operating the fastest interest rate hike in its history, from −0.5% to 3.5% in eleven months, in the name of the fight against inflation, a start of political revolt is blowing against the ECB, coming from administrations of very different sides, from the left to the extreme right.
“The simplistic recipe of raising interest rates is not seen by many as the right way to go.attacked Giorgia Meloni, the Italian prime minister, of the post-fascist party Fratelli d’Italia. It cannot be ignored that constantly raising rates risks damaging the economy more than it reduces inflation, making it a cure worse than the disease. » His Deputy Prime Minister, Matteo Salvini, of the far-right League party, felt that the ECB’s policy was “absurd and dangerous”.
Passing through Brussels for a European summit, the Portuguese Prime Minister, the Socialist Antonio Costa, made a very similar speech. It’s necessary “to safeguard the living conditions of families, the ability of companies to invest and of the economy to continue to grow and generate jobs that generate better wages”, he launched at the ECB. Criticism also came from Spain: “We are in a situation that may no longer require an interest rate hike,” estimates the Minister of Economy, Nadia Calvino.
Such public criticism is rare. The independence of the ECB is guaranteed by the European treaties and governments generally refrain from attacking the institution head-on. But, with the great return of inflation, the central bank finds itself in direct confrontation with the governments. To calm the rise in prices, it has only one method, particularly not very subtle: it increases interest rates in order to slow down the economy.
Inflation, an insufficient argument
However, the European situation, without being catastrophic, is worrying. The euro zone is in technical recession (GDP down 0.1% in the fourth quarter of 2022 and in the first quarter of 2023) and everything indicates that this will continue in the second quarter. Household consumption is down and below its pre-pandemic level, unlike in the United States, where it is almost 8% above. Everywhere, real estate markets are showing serious signs of weakness, while industrial production is stagnating.
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