Medina defends ‘narrow path’ in face of recession fears

“BUTThe two items are connected. It is natural for finance ministers to express their position of prudence and caution. Central banks are responsible for managing monetary policy and today inflation is a central issue in Europe and also in Portugal.” said Fernando Medina, speaking on the second day of the informal meeting of EU finance ministers under the Czech Presidency of the Council in Prague.

After the eurozone governments acknowledged on Friday that the war in Ukraine and the energy crisis had increased the risk of a recession, the Portuguese minister defended the “narrow path to take from a strategy to reduce inflation, when an important part of the effect of inflation, moreover, does not follow from circumstances of domestic demand in the European Union, but stems from energy prices”.

“It is clear that action needs to be taken here, but it is clear that this action must be balanced with what will happen in terms of the economic front,” he added.

According to Fernando Medina, the euro countries must then go “the path between these two sides, between what happens from an economic point of view and what happens with inflation.”

And he warned: “If we don’t deal with inflation now, it will be harder to deal with it later.”

Eurozone governments have acknowledged that the war in Ukraine has increased the risk of a recession, but dismissed the fact that the economy is inevitably doomed and vowed to take action to fight inflation and mitigate its impact.

“The risk has increased, but a recession is not inevitable,” Eurogroup President Pascal Donoe and European Commissioner for Economics Paolo Gentiloni said at a press conference after the first day of an informal meeting of Eurozone economy and finance ministers in Prague, which focused on how to respond to the crisis because of the war in Ukraine.

Rising energy prices, exacerbated by the invasion, pushed inflation in the eurozone to a record 9.1% in August and forced growth forecasts for 19 countries to be lowered to the point where the European Central Bank had foreseen a recession in the event of a complete shutdown of Russian gas.

In addition to fiscal and monetary policy, the euro countries have already agreed that the solution to the energy crisis should include market intervention, which was also discussed by energy ministers on Friday in Brussels, where measures have begun to be developed to provide liquidity to energy companies or limit the profits of companies that produce energy at low prices.

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