Increasing confidency and predictability is considered key
The governor of the Bank of Portugal said on Friday that “inflation is under control”, and that Europe must “lower the level of risk” by increasing predictability and people’s confidence.
“Inflation is under control. The European Central Bank [ECB] has to be very good at communicating, because the inflation we are aiming for is medium-term. We are making decisions today so that in two years’ time inflation will be 2%. We’re already very close to 2%,” said Mário Centeno, on the second day of the La Toja Forum, being held in O Grove, Pontevedra, Galicia, Spain.
While acknowledging the importance of evaluating these matters on a day-to-day basis, the governor emphasised the importance of predictability in the fight against fragmentation, recalling how the European Union responded to the Covid-19 pandemic, leaving “no doubt about the financial system”.
“With Covid-19, the euro rose for the first time in a crisis context. Europe did its job, and we arrived at the crisis of the Covid-19 pandemic with lower levels of risk than we have ever had in Europe. Public finances were getting in order and that was extremely important to create confidence and create the response we had,” he said.
Centeno, therefore, argues that the European Union must “lower the level of risk, increase confidence, and involve people so that they understand” what is at stake.
The governor of the Bank of Portugal was speaking during a debate with the governor of the Bank of Spain on the Monetary union’s challenges of stability, growth, and competitiveness in the European economy.
Centeno gave a presentation called “Whatever it takes: trust and integration in Europe,” emphasising the importance of increasing real wages for economic recovery.
“Europe has suffered the biggest drop in real wages compared to the United States of America. People’s greatest ambition is to recover that. Without that, we won’t recover economically,” he said.
Centeno also stressed the “advances in Europe’s institutional architecture”, such as the “Single Monetary Resolution Mechanism” or the “European Stability Mechanism”, which will make it possible to “improve the risk context”.
“Having greater predictability in monetary policy is something that the governors have to offer,” he said.
The Governor of the Bank of Portugal pointed out that “we always want to have forecasts for all the results that the world can generate, to have a ready response”, but this “doesn’t exist”.
“The rest is managed with a culture of risk,” he explained.
For Centeno, “there are still several things to be done”, and it is necessary to “have confidence that the debate cannot stop”, which is why the Letta and Draghi reports on the competitiveness of the European Union “are important”.
“The issue of growth in Europe is central. We can’t avoid it,” he said.
Centeno pointed out that the labour market in Europe is cooling down, which should be cause for concern.
“In economics, you must be patient, and patience is liquidity,” he said.
Source: LUSA
