Interview with Ouest-France
ECB President explains rate hike to curb inflation driven by energy shocks, warns of growth risks, and rejects debt cancellation proposals during interview.
The ECB President attended a local event in Normandy not as a candidate but to clarify Europe’s role amid rising inflation. She emphasized the ECB’s mandate to maintain price stability, noting inflation at 3.3% in the euro area and persistent energy price pressures from geopolitical conflicts and refining capacity losses. The decision to raise interest rates aims to counter these inflationary pressures despite potential impacts on borrowing costs and economic activity.
Addressing concerns about growth risks, she acknowledged that while external shocks typically warrant caution, the current situation demands a stronger response due to prolonged energy volatility. She highlighted that France’s subdued growth and lower inflation relative to neighbors do not exempt it from the ECB’s euro-area-wide policy approach, stressing the need for structural reforms in France and across Europe.
On structural reforms, she cited labor market flexibility as a successful example from Germany and Spain, while stressing the necessity of ongoing pension and administrative reforms. She argued that Europe’s aging demographics can be offset by productivity gains, citing the continent’s educated workforce and savings as underutilized resources requiring better mobilization.
She dismissed proposals to cancel French debt held by the Banque de France as financially reckless and a violation of European treaties. Regarding financial stability risks, she acknowledged potential AI-related market corrections but noted Europe’s stronger financial sector compared to past crises, while warning of circularity risks in corporate investments.