Pause is the biggest threat to Europe’s recovery

What is the biggest threat to Europe’s economic recovery?

Former Italian Prime Minister Mario Monti said that the biggest threat to Europe’s economic recovery from the Covid-19 pandemic was “stagflation”.

Eurozone inflation in August hit a 10-year high as the consumer price index rose 3% year-on-year. Photo: AFP

Stagnation in economics is defined as a phenomenon in which the economy stagnates, growth slows down, but inflation and unemployment rates remain high.

Mr. Mario Monti, currently the President of Bocconi University (Italy), said that a large amount of monetary policy adjustments by central banks and fiscal stimulus packages from governments, were implemented. to support economies amid the Covid-19 pandemic, which “could cause more inflation”. But it also increases “manufacturing flexibility constraints”.

According to the survey results of IHS Markit, the purchasing managers index (PMI) of the Eurozone has dropped to the lowest level in the past 2 months when it only reached 59.5 points in August. compared to 60.2 in July. PMI over 50 reflects the industry/sector that achieved growth during the survey period.

Still, many economists think the eurozone’s growth momentum may be faltering. Furthermore, there are concerns that congested supply chains in Asia are hurting European manufacturing activity, in addition to concerns that rising wages in the region could put pressure on European manufacturing. inflationary force.

Speaking at the annual Ambrosetti International Economic Forum hosted by the European House on September 4, Mario Monti said that economies, not just the EU, could start to experience the problems of inflation. similar to what many countries witnessed in the 1970s.

Therefore, the former Prime Minister of Italy said that “it is very important to manage (economy – BTV) wisely and synchronously the transition from the necessary abundant financial and monetary support to a more normal situation”.

Preliminary data released earlier this week showed Eurozone inflation hit a 10-year high in August as the consumer price index rose 3% year-on-year.

As planned, the European Central Bank (ECB) will hold its next policy meeting on September 9 and is expected to discuss the upcoming roadmap for its asset purchase program. Some analysts hope that after this meeting, the European Central Bank will not rush to announce the reduction of the Covid-19 economic stimulus program until December.