European Central Bank President Christine Lagarde warned on Friday that the fiscal policies of some European governments could lead to excessive demand, adding that fiscal and monetary policies must work together for sustainable and balanced economic growth, Reuters reported.

In BNR Romania, it will take longer to bring inflation back to the target, and it will also be difficult for the tax authorities. Unlike central banks (which are currently hitting the brakes), governments are hitting the accelerator on public spending.

This is without discussing the costs associated with climate change, energy security, military security costs, subsidies given to the population to make it easier to pay bills, all of which will be calculated somewhere (economically – deficit, inflation, exchange rate, or settlement). will be social or political in the next election).

We are witnessing a “struggle” between central banks, designed to reduce inflation rates, and spending governments, which will make the fight against inflation more difficult. A decline in living standards will also show how much society is willing to compromise in the short term in the name of long term economic stability.

“Fiscal policy that creates excess demand in an economy facing supply-side constraints could force monetary policy to tighten more than necessary,” Christine Lagarde told a conference organized by the Bank for International Settlements in Bangkok. “Unfortunately, at the moment at least some of the fiscal measures that we are analyzing from many European governments, and especially among eurozone governments, point in the latter direction,” Lagarde said, referring to measures that could trigger excess demand.

The European Commission expects the eurozone economy to contract in the final quarter of this year and the first three months of 2023 as rising energy prices and rising interest rates undermine spending, borrowing capacity and confidence.

“We need additional investment and structural reforms to address supply-side constraints and ensure that potential output is not affected by the changing global economy. And in a world where external demand is even more uncertain, we also need to strengthen domestic supply and demand. thanks to greater productivity gains,” Christine Lagarde also said.

With inflation five times above its target of 2%, the ECB decided this year to resort to the fastest increase in the cost of credit in its history, as the interest rate on bank deposits was raised by 200 basis points, to 1.5%, in three months

In this context, Christine Lagarde said that inflation estimates should remain unchanged and the public should know that the rate of price growth will be returned to the target level. “What we need to do as central bankers is conduct a monetary policy that captures valuations… We need to signal to the public, observers and commentators that under all scenarios inflation will return to our long-term target environment. , ordered,” said Lagarde.