Return of inflation worries Europeans, who are struggling to find a coordinated response

It is now a matter of major concern for Europeans. Inflation, which had almost disappeared from the economic landscape of the Old Continent, is making a comeback. Over one year, it jumped in the euro zone by 4.1% in October after an increase of 3.4% in September. And, as we saw on Monday, November 8, during the meeting of the finance ministers of the monetary union in Brussels, it is as much a cause for concern as it is for debate. Worry, because the rise in prices could jeopardize the recovery, after months of pandemic. Debate, because the Twenty-Seven are not aligned on the response to be provided and that a tightening of monetary policy could break the return of growth in its tracks.

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Christine Lagarde, President of the European Central Bank (ECB), who participated in the Eurogroup, once again assured that the phenomenon is temporary, and that after a predictable peak at the end of the year, inflation , mainly linked to the rebound in the economy, should lose momentum. But this, at a slower pace than could be expected a short time ago. “The rise in inflation could be more durable than expected”, summed up Paschal Donohoe, the president of the Eurogroup. In the medium term, however, forecasts the Monetary Institute, inflation should fall below 2%. In this context, Christine Lagarde sees no reason to increase rates.

Salary negotiations across the Rhine

Germany, for its part, where the rise in prices is close to 5%, does not hide its concerns. While wage negotiations have started across the Rhine and unions are calling for wage increases that take inflation into account, Berlin fears that the phenomenon is taking hold. the Bild Zeitung also went to war against Christine Lagarde, whom the newspaper renamed “Mme Inflation ”and that he accuses of impoverishing savers and retirees. As for Christian Lindner, the German liberal who could become the finance minister in the next coalition between the Greens, the FDP and the SPD, he has, on several occasions, warned of the dangers of the return of inflation.

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But the German government does not want to hear about a reform of European energy markets, despite soaring gas and electricity prices. Even if it represents half of the total price increase (the rest being largely due to bottlenecks), this inflation, it is hammered across the Rhine, is purely cyclical and it is up to the Member States to ” mitigate the effects, through subsidies and tax cuts. A position shared by ten other countries (Austria, Luxembourg, Denmark, Estonia, Finland, Ireland, Latvia, Netherlands, Belgium, Sweden).

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