Time.news – “Although the United States will regain its pre-crisis level this year, the euro zone will not do so until mid-2022. We may have definitely lost two years of growth“It is the alarm raised by Fabio Panetta, member of the board of the ECB, in an interview with the Spanish newspaper ‘El Pais’.
And he underlines: “There is a little less uncertainty, but it is still high. Vaccine distribution is accelerating, but still slow. And the pandemic is advancing rapidly in some countries, affecting growth prospects.
Inflation will remain below our 2% medium-term target, contrary to what happens in the United States, the United Kingdom or Canada. We need to be more ambitious to increase growth potential and bring inflation closer to our target. And we must give consumers and investors greater guarantees on the prospects of the European economy “.
Consider new tax impulses
“In Europe we must now implement the EU recovery instrument so that the Commission can pay out the funds soon. E we should consider new fiscal impulses so that demand returns to its potential more quickly “, Panetta underlined in another passage of the interview.
“The US stimulus plan is ambitious, especially this year – he noted – and this largely explains why its growth trajectory is moving away from that of Europe. Keeping the economy warm is good for employment, investment and productivity. And faster recovery helps the most disadvantaged members of society. ”
In the United States, he added, “inflation returns to healthy levels because monetary and fiscal policy work closely together. The inflation forecast in the euro area is unsatisfactory. Inflation will rise temporarily this year, but for cyclical reasons it will fade in 2022. However, with a more dynamic policy mix we too could benefit from improvements in the global economy. “
Uneven recovery risk in EU countries
Exists “a significant risk” of an uneven economic recovery among the countries of the European Union. Panetta stressed when answering a question about the possible harm to Spain or Italy from an early withdrawal of the stimulus.
“The pandemic has hit each country differently, depending on its exposure to the sectors most affected – he added – but there has been a common European response.
If we use the 750,000 million euros of the EU recovery tool wisely – Next Generation Eu – the exit from the crisis can be more homogeneous. This tool should be linked to the reforms needed in each country. If funds are invested in growth sectors with the future in mind, the recovery will be more balanced. If successful, this plan could be the prototype of a future common fiscal instrument“.
They damage the economy more than we see now
“In general, it would not be wise to bet on a quick recovery – Panetta continued – there are risks that can prevent the planned improvements from being implemented. And even if we manage to get out of the pandemic soon, we will realize that the damage to the economy is greater than what we see now. “
“Nothing prevents the euro zone from having a robust recovery – he concluded – but for this reason the economy must be supported with the appropriate level of monetary and fiscal stimulus. Prudence tells us that it is better to inject too many stimuli than not be up to it “.
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