EU's Gentiloni says outlook for European inflation and purchasing power is 'very good'

Well, first of all, I would say private consumption we had, we had a very, very difficult 2023, not only stagnation and recession in several Member States, but also an an an enormous amount of savings, increased level of savings, uncertainty, the war etcetera. Now gradually the activity is accelerating and the main driver will be private consumption. At the same time, you have two other factors that are very positive. First, inflation is indeed declining and employment is still high, high, very high. It will continue to increase in the coming months. On inflation, you are seeing an improvement in terms of some of the record numbers we saw a couple of months ago. However, you're noticing your in your report that the decline in inflation is not as faster as you would have predicted in the past. When you think about inflation and when you put these forecasts together, what were your assumptions in terms of rate cuts by the European Central Bank? Well, what markets are expecting is first decision of interest cuts in June. This is the market expectation. What we estimate in our forecast is that the the path of declining will continue maybe a little bit slower than predicted, not one year ago, but couple of months ago. But in any case we will reach the ECB target, so the 2% of inflation in 2025 next year. So the perspective is very good especially for purchasing power of families. If you have moderate growth and lower inflation, this is good news for the families and purchasing power and so good news for consumption. So tell us what you're worried about because you're seeing better economic improvements, you're seeing inflation coming down At this stage, what is the big headache when you think about the outlook for the eurozone? Is it geopolitics? Well, I I would mention two things. First, of course, we have enormous challenges, our competitiveness, the investments that we need for the green transition, for innovation in our societies and we have a decent level of public investment thanks to next generation EU. But we had not a sufficient increase in private investment in the last period and this is part of the negative picture of 2023. The second reason of concern is of course what we call the geopolitical situation. De facto, we have a war near to our borders and this is affecting the euro economy much more than other global actors. So it's still quite a challenging picture for the future. It is subject to a lot of uncertainty. And my view is that also the level of savings, which is still too high in Europe is influenced by this geopolitical uncertainty. Tell me about the economic, the picture on trade. Basically I'm asking this because yesterday we saw the United States announcing new tariffs on China. We're having tough conversations here about how the block needs to be more competitive and we could see the European Commission taking similar steps really. But ultimately, tariffs will jeopardize global trade. Are you worried that this protectionist tone from the US, from Europe will actually have an impact on the eurozone economy? I think that as far as Europe is concerned, we need a more mature attitude in our trade, securing our economy also in our trade and especially with China. As you know, we opened a couple of inquires in some sectors, electric vehicles, wind turbines, to understand if the level of subsidies is too high, disrupting any chance for European companies. But this is not bringing us to a theory of decoupling of global trade, which would be a disaster for both part of the decoupling. So even if the EU goes ahead with tariffs on Chinese E VS and wind turbines, you're suggesting that you still need to be quite careful about the impacts on the economy. Absolutely. We we need the the characteristic of the EU economy is to be more open, more influenced by trade and less by only internal consumption. This is the reason why, the economic reason, why it is in the interest of the European Union to keep the doors of trade open. Going back to the question of competitiveness, we're we saw some, you know, rumours in Spain that we could actually see a merger happening in the banking sector there. My question to you really is what is lacking to actually see action when it comes to developing capital markets union because you have the potential merger there and then the Spanish authorities were against this idea. Well, I'm not referring specifically to the it's just one example to the Spanish example. Overall, the experience of these years shows me that we are very strong in words about the capital markets union, but very weak in in decisions. Why this is not honestly at all a responsibility of the EU Commission. This is the fact that Member States are understandably jealous of their own systems, of their own autonomy, of their own savings products, of their own supervision on financial market. But if this is the attitude, I think we will continue to lag behind in terms of venture capital dimensional of the financial markets, role of the banks. If we want to move in this direction, we should leave this kind of attitude a little bit behind. And I'm sure that we will do it. If this will not be decided at the unanimity, which is, I think, our goal, I am sure that at least a certain number of count of countries would move on.

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