Riga, Nov 3 (EFE).- The European Central Bank (ECB) remains “single-mindedly focussed” on price stability in the Eurozone and will use “all instruments in our toolbox” to achieve a 2 percent inflation target in the medium term, ECB president Christine Lagarde told a conference in the Latvian capital Thursday.
She warned that “a mild year-end and 2023 recession will not suffice to dampen inflation” and said that any fiscal stimulus by governments should be temporary, targeted and tailored to selected, vulnerable sectors of the economy.
Such measures should target the most vulnerable and should include incentives to save energy as well as direct spending to reduce energy consumption, Lagarde said.
The ECB president also said that the 0.75 percentage point hike in interest rates by the United States Federal Reserve should not be seen as a sign that the ECB will follow suit.
“The US and the Eurozone are not similar, there are different sources of inflation,” she said, adding that price rises in the US were driven by strong demand in the economy and a tight labor market.
The ECB chief highlighted the differences with data, saying there were 1.7 vacancies per unemployed person in the US, while in Europe, jobseekers outnumbered vacancies.
Lagarde was joined in a discussion panel by European Commission (EC) executive vice president and commissioner for trade Valdis Dombrovskis, who stressed the need for a coherent policy mix across the European Union, where “monetary and fiscal policy should not be at cross purposes.”
Dombrovskis said the EU was continuing to move toward closer coordination of fiscal policies via the so-called European Semester, a framework for integrated surveillance and coordination of economic and employment policies across the bloc.
Both Lagarde and Dombrovskis agreed that EU economies would have to suffer temporary energy price spikes as part of a transition to sustainable, renewable and “greener” sources of energy.
The ECB president stressed that EU countries must accelerate the anticipated energy transition to an environmentally friendly mix of alternative sources and renewables, with even nuclear power on the cards.
Lagarde warned that trade and supply chains were also affected by climate change fuelling inflation.
The ECB head spoke of how low water levels on the Rhine river had already affected a major European economy after barges carrying goods were loaded to only half capacity, impacting Germany’s trade and GDP.
Dombrovskis championed the EC’s “flagship policy”, the European Green Deal, and said that as a result of the EU’s response to the war in Ukraine the bloc was accelerating a sustainable transition and the phasing out of fossil fuels.
Regarding Ukraine, the EC official said the bloc’s institutions were working on a Ukraine reconstruction plan worth around EUR 400 billion.
Dombrovskis and Lagarde spoke at a conference to mark 100 years of Latvia’s central bank, Latvijas banka, hosted by central bank governor Mārtiņš Kazāks.EFE