Inflation whether there is a war or not!
Speech by Isabel Schnabel, Member of the Executive Board of the ECB, in which she describes the new sources of inflationary pressures related with the transition to a green economy and the change in the energy model. She focuses on the role of monetary policy in this protracted context of high inflation to protect purchasing power and promote growth and employment.
Key findings from the report:
- Inflation levels in many countries at the highest in over 40 years, due to surging commodity prices, calling for a step change in energy policy. In 2019 oil products and natural gas still accounted for 85% of total energy use in the euro area.
- The war in Ukraine shows us how dependence on fossil energy is not just a threat to the planet, but also it is a threat to national security and our values of freedom and democracy.
- The transition to a green economy will come at a cost: As we build a more sustainable economy, reliant on renewables “freedom energies”, we face a new age of energy inflation with three distinct but interrelated shocks that can lead to a prolonged period of upside pressure on inflation:
‑ Climateflation: linked to the costs of climate change itself, for example the rise on food prices due to an increase in natural disasters and severe weather events like droughts.
‑ Fossilflation: linked to the cost of the dependency on fossil energy sources. Fossil fuels become more expensive in any supply shock such as a real war or lower production levels. In this regard, oil and gas markets are often artificially tight, pushing up prices at the expense of energy importers, such as the euro area.
‑ Greenflation: A more subtle pressure on inflation has to do with the companies’ investments in green technologies that require significant amounts of metals and minerals, such as copper, lithium and cobalt. Rising demand of this products versus a constrained supply leads to price rises. So far, greenflation has had much less of an impact on final consumer prices than fossilflation.
- Climateflation and fossilflation share many of the characteristics of an adverse supply shock while greenflation is much more likely to be the result of a strong and persistent positive demand shock, or investment boom.
Filter results
According to AFME, a clearer, more coherent, and proportionate regulatory environment, without unnecessary layers and focuses on growth and competitiveness, is keyl to increase investor confidence, unlock private capital and deepen European capital markets
According to the Center for the Governance of Change at IE University, Europeans support technological progress if it reinforces security, inclusion, and social welfare; but resist it when change feels imposed, opaque, or misaligned with their values.
According to a recent report released by CEPS, European financial regulators should adopt competitiveness as a formal secondary objective, following the precedent established by the UK's Financial Services and Markets Act 2023.
According to the OECD. SMEs and start-ups that grow rapidly contribute significantly to job creation, economic growth and competitiveness. Indeed, SMEs that grow by one-third over a three-year period, contribute about as much to job creation as large firms.
According to @McKinsey, banks must prepare for a new growth curve. Strategic precision —the ability to combine technology, capital discipline, and deep customer insight— will distinguish the leaders from the laggards.
According to Kristalina Georgeva IMF Managing Director, lifting growth requires three things: one, regulatory housecleaning to unleash private enterprise; two, deeper regional integration; and three, preparedness to harness AI.
According to The European House – Ambrosetti, the European Union has an opportunity to boost competitiveness and growth by simplifying regulatory and supervisory frameworks, particularly in the areas of sustainability and the financial sector.
According to Ramón Casilda Béjar, Spain, in today’s complex geopolitical landscape, has the opportunity to strengthen its role as a bridge and connecting country between Ibero-America and the European Union, revitalizing investment flows in both directions.
According to @ECB, in moments of acute stress, the public often turns to physical currency as a reliable store of value and a resilient means of payment, underscoring the crucial role it plays above and beyond everyday transactional convenience
According to Juan S. Mora-Sanguinetti, in Spain a 10% increase in regulatory volume leads to a 0.5% drop in employment in companies with fewer than 10 employees.
According to Hélène Rey “In a world where stablecoins, particularly those pegged to the dollar, become an important global payment tool, we must brace ourselves for substantial consequences”.
@judith_arnal proposes reforms for the EU to advance regulatory simplification, starting with consensus on its meaning, with competitiveness as a pillar, plus coordination mechanisms and a governance rethink.