Most eurozone economies except Germany are growing but fragile. Can the ECB damp down inflation without suffocating the recovery?
, deepening the furrows on President Emmanuel Macron’s ever more troubled brow. To use a French word, the national vibe has been shot through with a sense of malaise.
At the helm is the European Central Bank, which – like the Bank of England and other central banks worldwide – is trying to navigate the storm of inflation without hitting the iceberg of recession.The ECB has steered the 20-country eurozone up to the most delicate point in this journey. Headline inflation is easing, but the central bank needs to be sure it is stamped out, and menace still lurks in the core inflation numbers.
The IMF last week forecast that the German economy, with its uniquely large exposure to Russian gas and to Chinese demand, would shrink 0.3 per cent this year. Growth in the second quarter was flat. Inflation is not coming down as quickly as elsewhere in Europe.Economy minister Robert Habeck admitted that things “were not good”, but said there was no need for “angst”.
Sweden, which is not in the eurozone, provides a salutary signpost of where the ECB might take the world’s third-largest economy if it goes too far.
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