Squeeze of the ECB, Giavazzi (Draghi’s adviser): “Inflation depends on the price of gas, raising rates is a wrong tool”

“There ECB promises to raise i taxi to respond to the increase ininflation with a tool wrong“. If the Minister of Economy Daniele Franco he had limited himself to soft phrases and hypothetical periods, hoping that they would be avoided “tensions not necessary ”but noting that the announcements arrived last week from Christine Lagarde were “predictable”, Francesco Giavazzi openly criticizes the Eurotower’s decision to normalize monetary policy. The economist who has been the prime minister’s economic advisor since last year Mario Draghi, speaking at the Alberto Giovannini Award, he said in practice that in the European context the rate hike is unmotivated because “we don’t have demand inflation like we do Use but we have inflation linked to the price of gas“. Last Friday Franco expressed the same concept but with extreme care not to launch explicit attacks: “If he is on the side of demand, the increase in rates is appropriate to contain inflation, if inflation largely depends on supply shocks the rate hike is less relevant“, He explained.

Giavazzi’s prediction is that the increase in rates together with the enlargement of the spread “in a few months will reduce private demanda ”thus starting the economy towards a slowdown if not a recession. What to do? “In the face of the reduction in private demand in the coming months, we must speed up the Pnrr“. Because it is still true that the attacks on Italy are behind them structural weaknesses long-standing still unresolved that ballast growth. “The reason there is a spread that raises the cost of debt in Italy is the debt-to-GDP ratio. Today the number one priority is reduce the debt / GDP ratio and we can do it by accelerating GDP. The PNRR can allow us to do so ”, according to Giavazzi, according to whom, however, there is no case for Italy:“ Our spread is identical to that of countries that have the same debt-to-GDP ratio. So there is nothing special about Italy ”.

Also there European Commission on Monday he invited Italy to “implement with determination” the reforms and investments envisaged in the recovery and resilience plan. The deputy chief spokesperson of the community executive Dana Spinant, during the press briefing in Brussels, when asked about the widening of spreads after the announcements of the ECB, replied that the central bank is “independent” in its decisions and “as regards Italy in particular, there are reforms and investments outlined in the NRP that we expect significantly strengthen resilience of the Italian economy, his sustainability and its comparability. Italy is today in the implementation phase and we obviously encourage the Italian authorities to continue with determined implementation ”.

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