The ECB believes that public aid does not offset the inflationary impact on the vulnerable

2023-05-19 13:35:11

Another slap on the wrist of the European Central Bank (ECB) to public spending policies adopted by governments to try to alleviate the impact of the recent inflationary crisis. The agency has begun to detect that “public support is not adequately compensating for the loss of purchasing power of consumers with lower incomes.”

The data handled by the agency indicate that these families are the ones that have suffered “disproportionately” from the rise in prices of the last year. “Despite the available fiscal support, the number of households that have dissaved has grown, and those with limited savings have been the ones that have had to make the most sacrifices,” indicates the ECB in its latest Economic Bulletin published this Friday.

The greater the impact on savings, the vulnerable also suffer more in terms of consumption and spending, at a time when inflation has completely derailed the household budget. In those with lower income, once again, there is greater exposure to increases in the prices of basic necessities, such as energy or food. “This effect is amplified by its limited ability to replace more expensive varieties with others of less value or to substitute spending between different product categories,” the ECB economists insist.

It is evident that the highest incomes have it easier in this regard. As is also the case, according to the agency, with the greater ability to seek solutions to rising prices, having greater access to credit, the possibility of working more hours, etc. “On the contrary, the ability of low-income households to consume less, use savings, access credit or negotiate wages is usually limited or nonexistent,” warns the ECB.

Under this premise of the limited impact of public aid on the saving and spending capacity of vulnerable families, the institution once again recommends that governments be extremely prudent in aid, especially those that imply putting the countries’ public finances at risk. more in debt.

Moreover, he considers that as the energy crisis fades, “governments should reverse support measures quickly and in concert” to avoid further inflationary pressures in the medium term. In Spain, for example, the reduction of the energy VAT -from 21% to the current 5%- or the reduction on the special tax on electricity, among others, is still in force.