(Finance) –
In recent years, the ECB’s autonomy in conducting its monetary policy has been preserved and “has not been dominated by budgetary policy”. He stated it Isabel Schnabel, member of the Executive Committee of the ECB speaking at a conference on the 25 years of the euro. “The robust monetary response to sharp increases in inflation shows that price stability objectives have been resolutely pursued and that monetary policy confidence has been preserved,” she said.
In the years to come, “future-proof budget policies will be a prerequisite for safeguarding the independence of monetary policy. The consolidation of the accounts “in line with the new rules” of the revised Stability and Growth Pact is current, while preserving investments in the future, it will be “essential to safeguard long-term growth – he concluded – and price stability”
In the long speech Schnabel underlined that “Over the last four years, the euro area has faced several severe shocks that have caused a fundamental change in the macroeconomic environment.
The long period of very low inflation and low interest rates ended abruptly with the pandemic and Russia’s invasion of Ukraine. In response to the sharp increase in inflation, the ECB raised interest rates on an unprecedented scale, which significantly increased financing costs for governments, households and businesses.”
Governments “They responded to the pandemic and the war with far-reaching support measures aimed at mitigating their negative impact on income, employment and growth. This led to a significant increase in public debt as a percentage of gross domestic product, which was dampened by rising inflation.”
The current public debt-to-GDP ratio of 90% in the euro area “remains close to the maximum level reached during the European debt crisis, far exceeding the 60% ceiling established by the Maastricht Treaty, while notable differences remain between member states”.
Schnabel also pointed out that “fiscal measures played a key role in overcoming the crisis. However, the new interest rate environment means that high levels of debt, especially in highly indebted countries, will result in a significantly higher interest burden in the coming years.”