Pierrakakis: “There is stagflationary pressure, but Europe is holding up”

Brussels – On the eurozone economy, “there is stagflationary pressure, but we are still operating within a growth perimeter,” Eurogroup President Kyriakos Pierrakakis said the day after the release of the spring economic forecasts, offering an assessment that struck no note of concern. Firstly, he explains on the sidelines of the Eurogroup meeting, because there are “no major surprises” in the European Commission’s forecasts, and secondly, because “there is a trend towards stagflation, but we are not yet in that situation.”

 In short, the European Union was ready for what the European Commission might write in its document; after all, the Commission itself had warned of the risk of stagflation. Of course, Pierrakakis acknowledges, the EU executive’s estimates are characterised by “growth forecasts revised downwards, and inflation estimates revised upwards,” and it is precisely this that is driving those pressures and trends towards stagflation (stagnant growth and high inflation, in fact), but “the European Union is capable of withstanding this, and we must build from here” the response to the energy crisis and its impact on production, growth, and competitiveness. 

The Eurogroup President wishes to be as clear as possible in stating that this is not the time to relax public spending controls, and he uses strong language: “We must protect our citizens, especially the most vulnerable, but we cannot allow the energy crisis to trigger a financial crisis.” This means that public aid measures must not worsen public finances, and, therefore, must not increase either the deficit or the debt. This message is particularly relevant for those countries already heavily in debt, such as Italy, which has already introduced and extended measures to address high fuel prices. “We must be surgical” in our response to high energy prices, Pierrakakis insists. He reminds everyone, including Italy, of the nature of the support measures: “They must be temporary, targeted, and limited in scope.”