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“The ECB supports inflation”: the reasons that could lead Europe into recession

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According to Natixis Chief Economist Patrick Artus, the issue of Russian gas and purchasing power could weigh on the European economic situation in the coming months.

The deteriorating economic situation in Europe, already undermined by inflation, increases the risk of recession. According to the S&P Global PMI, economic activity in the euro zone contracted for the second consecutive month in August in the private sector. What could push Europe into recession is “obviously” Russian gas, Patrick Artus, chief economist at Natixis, said Wednesday morning on the set of BFM Business.

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In addition, for the chief economist of Natixis, the price of gas must also be taken into account. “There are certain companies that prefer not to produce than supply themselves at that price, and that regardless of the amount of gas. There is a double issue of gas, ”he assured. The question is “where will we be with the war in Ukraine in the spring” and whether “relations with Russia will improve or worsen […]. We don’t really have an answer” at this point, she continued.

Purchasing power

But what could also cause a recession is “the issue of purchasing power,” argued Patrick Artus. “The recession can also come from household demand, [avec] a drop in consumption. There, at the moment, Europe has a very different policy than the United States or the United Kingdom, [où] Governments have let purchasing power bear the brunt of rising prices for energy, food, etc.

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The economist points to a “misunderstanding” of the ECB’s behavior. “If the ECB wants to fight inflation, it must raise interest rates, much more than the messages it sends. Especially since governments have this policy of supporting household consumption.” […]. So the ECB must also offset government aid to households to reduce inflation, and we are a long way from that. […]. The ECB is actually supporting inflation.”

Author: Jeremy Bruno
Source: BFM TV

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