The European Central Bank’s interest-rate hike sparked a backlash from Italy and Portugal, while Spain’s deputy premier expressed hope that its tightening push is now done.
(Bloomberg) — The European Central Bank’s interest-rate hike sparked a backlash from Italy and Portugal, while Spain’s deputy premier expressed hope that its tightening push is now done.
As the close-run decision by President Christine Lagarde and colleagues in Frankfurt to raise borrowing costs by a quarter point rippled across the region, the political reaction echoed previous episodes earlier this year.
“The ECB, which doesn’t care about the economic difficulties of families and businesses, is increasing the cost of money,” Italian Deputy Prime Minister and League Leader Matteo Salvini said on broadcaster Rete 4 on Thursday evening, according to Ansa. “Lagarde is living on Mars.”
With the president warning that “the difficult times are now” after officials tightened policy again for an economy that they acknowledge is on the verge of a contraction, critical politicians focused on faltering expansion.
“This decision by the ECB places very important challenges for economic growth next year, and a slowdown in growth is expected as a result,” Portuguese Finance Minister Fernando Medina told reporters on his arrival at a meeting of counterparts in Santiago de Compostela in western Spain. “I’ve said more than once that I considered that a rise in rates at this moment would be a bigger risk for the economy’s progress.”
Italy has previously proven the epicenter of political anger at ECB decisions. It’s become typical there for members of Prime Minister Giorgia Meloni’s coalition to criticize rate hikes with increasing intensity in tandem with the pressure that each move places on the economy and its debt-servicing costs.
Salvini spoke after Adolfo Urso, a minister in Meloni’s Brothers of Italy party, said that the move “will not, I believe, help the economic recovery of Europe.” Forza Italia Leader Antonio Tajani, who is another Italian deputy prime minister and its foreign minister, was also critical.
“It is a mistake to raise rates, as it negatively impacts industries and families, and this halts growth and favors recession,” he said on Friday. “I hope that there won’t be more announcements of new rate hikes. It is deeply wrong and it hurts the economy.”
By contrast, the decision did satisfy German Finance Minister Christian Lindner.
“Inflation remains too high,” he told reporters at the meeting of European Union counterparts and central bankers in western Spain. “The ECB’s decision is understandable.”
Spanish Deputy Prime Minister and Economy Minister Nadia Calvino, who is hosting that gathering, kept a diplomatic tone to her reaction while sharing her aspiration that the ECB won’t hike again.
“I hope they get it right,” she told Bloomberg Television. “From the national perspective, I also hope they stop now, because our inflation rate is already quite low.”
Indeed, both investors and economists think that officials in Frankfurt are now done hiking and two typically more hawkish ECB officials said Friday that maintaining rates at the current 4% for a prolonged period may be sufficient to tame inflation.
–With assistance from James Regan, Alessandra Migliaccio, William Horobin, Jorge Valero, Alonso Soto and Flavia Rotondi.
(Updates with Calvino, starting in first paragraph)
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