Invasion of Ukraine puts pressure on financial markets because it puts obstacles to growth and raises prices, but the euro continues firmly on its way to parity with the dollar because Europe is more credible after the invasion of Ukraine than before. “We have shown that we are diverse and united in adversity”, Christine Lagarde defended in Davos, where she participated this morning in a panel entitled “European Unity in disorderly times”.
Sitting next to the president of the ECB was Mark Rutte, the Dutch prime minister, much more critical of European operations and who has complained that while three large EU countries such as Germany, France and Italy continue to be determined to do politics on their own , Europe cannot be considered a global actor in conditions.
Lagarde has replied that, from what little he knows about football, the more stars there are in a team, the more goals they score. "I don't know much about sports, but I'm going to continue with this analogy because it seems very appropriate to me," Lagarde apologized for his lacuna, and went on to emphasize that Europe is a political, commercial, technological and even moral power.
The president of the ECB has not addressed any of the most problematic issues about the euro zone before the Davos audience. His number two, Luis de Guindos, was in charge of that at the same time in Frankfurt, in the presentation of an ECB report that confirms that the war in Ukraine has "increased the risks for financial stability due to its impact in practically all aspects of economic activity' in Europe. Consumer prices (7.5% in April) are at an all-time high and well above the target, while the bloc's economic outlook has dimmed, in a "severe" scenario.
Central banks are rushing to
raising interest rates to block price escalation and the step, already taken by the US Federal Reserve and announced by the ECB, could "increase" vulnerabilities, according to the report. In addition to a possible reassessment of riskier assets, higher rates could add to the financing challenges facing "highly indebted companies and governments," such as Spain's. The ECB also notes that the reactivation of bank profitability after the pandemic threatens to be short-lived, according to de Guindos.
Lagarde has preferred not to speak in public about
the ECB rate hike from July that he will launch this process, the results of which are still subject to great uncertainty, but he has granted an interview to Bloomberg to clarify his position. After announcing in an ECB blog the end of negative interest rates by the end of September, he has redirected his speech and curbed speculation, acknowledging that there is no consensus in the governing council for a hit increase of half a percentage point in reference interest rates.
Lagarde has assured that the ECB will proceed "gradually" and has recalled that the situation in the eurozone is different from that of the United States. If inflation expectations were to be “de-anchored”, i.e. if they drifted completely away from the ECB's inflation target out of control, or even if there was strong demand pressure on inflation, a different approach might be needed. , has also admitted, after insisting that the ECB is moving towards the "normalization" of monetary policy, not towards tightening. “We are not going to panic,” he has promised. The president of the ECB does not lose sight of the differences in inflation in the different countries of the euro. Among the Baltic countries, for example, Estonia has reached 19%, while others, such as France, maintain 5.4%.
In a room next to the one where the panel in which Lagarde participated was taking place, a colloquium entitled "Climate action begins at home" was taking place, in which Teresa Ribera exchanged analyzes together with a cast well below the level corresponding to a vice-president of the government, made up of the Colombian activist Alejando Daly, the consultant and CEO of the fashion and luxury sector Shireen El Khatib and the director of Sustainability of Unilever Rebecca Marmot. Ribera defended that climate protection is not just a matter for governments, that corporations are also institutions that must be involved in the process, and that all communication efforts to explain to consumers the advantages and benefits of paying more for Climate-friendly products will be few, as will all the advances in transparency.
The Minister of Industry and Tourism, Reyes Maroto, was also in Davos this morning, who does not foresee that monkeypox "will have a negative impact" on tourism because the cases are "very limited." However, she has recognized that inflation "can indeed be an element that reduces the capacity of families."