If this Thursday the ECB acted with a historic rise in interest rates, this Friday there are parallel meetings in Prague and Brussels that are decisive for the near future of Europe. In Brussels, the 27 energy ministers meet urgently to respond to the energy crisis and the Russian gas cuts, which have a direct effect on the record inflation that the eurozone is experiencing –9.1% in August–. And in Prague the Ministers of Economy meet, where they will listen to the president of the ECB, Christine Lagarde, where the specter of recession hovers.
The ECB opens the door to recession in Europe if the war in Ukraine continues and Putin cuts the gas
And on Friday the ECB published projections whose less optimistic range predicted a fall of 0.9% of GDP in 2023. And the European Commissioner for the Economy, Paolo Gentiloni, recognized upon his arrival at the Eurogroup this Friday that "the risks of recession are there.
“We know that we are entering an autumn with a situation of unprecedented uncertainty”, affirmed Gentiloni: “On the one hand we have a certain level of growth, we still have very low unemployment. But, on the other hand, with this inflation and a prospect of difficulties with risks of recession that are there”.
“Thus”, continued Geniloni, “in this uncertainty, what is crucial from our point of view is to cooperate with fiscal policy, with monetary policy, to keep the inflation curve downward. But we all know that the real tool to curb inflation is to have an efficient energy package. And it is very important that next Tuesday the European Commission finally present its proposals to deal with the energy emergency. And this will be, I think, a great contribution also to the general economic situation”.
Gentiloni, thus, attaches more importance to the response to the energy crisis than to the ECB's monetary policy that cools the economy by raising rates: "This decision was largely expected, it is also within a framework of global decision of the monetary authorities. We have the opportunity, if we work together on monetary policy, fiscal policy, and if we have the right energy package now, avoiding recession is a challenge, but it is possible”.
The rate hike, Gentiloni said, “is the decision of the ECB, they make the decision based on data, but normally this is a process. Interest rates before yesterday's decision were at zero in Europe. We must not present the situation as if the level is terribly high. It is an important decision. But highly anticipated."
Calviño: "I haven't mentioned that word"
The Spanish economic vice president, Nadia Calviño, has avoided talking about a recession this Friday. “I have not mentioned that word”, she replied to a journalist who asked her about the EU's entry into that scenario: “Yesterday's interest rate hike by the European Central Bank was expected by the markets. It was within what we all expected to occur in a context of depreciation of the euro such as the one we are experiencing. We are going to listen very carefully to the explanations, the presentation by Mrs Lagarde, but all the forecasts point to a prospect of falling prices in the coming months and all the organizations expect Spain to have strong growth above the average for the OECD, above the average of the European Union and the average of the large countries”.
Agreement between governments for the minimum corporate tax?
The Spanish vice-president has also announced the movement of several countries to reach an agreement to move forward with the common minimum corporate tax, now blocked by Hungary in response to the lawsuits opened with the rest of the EU for its authoritarian and homophobic policies, which They have European funds frozen: “We are going to promote a joint declaration on the part of Spain regarding the need to accelerate the adoption at European level of a minimum level of corporate tax. In other words, that we have a common system as soon as possible, common rules, to have a minimum corporate tax and that therefore, the large companies also contribute to financing the impact of the crisis on the energy markets”.