The Covid-19 pandemic has threatened "the very economic fabric" of the European Union, but the spirit in which the bloc faced the crisis must be channelled to combat the current challenges of inflation and cost of living, Minister for Finance Paschal Donohoe has said.
Mr Donohoe, who is also president of the Eurogroup, was addressing a seminar in Madrid alongside Nadia Calviño, vice-president of the Spanish government, on the future of the euro area as it emerges from the coronavirus emergency.
He told the event, which was co-hosted by the Dublin-based Institute of International and European Affairs, that the factors which have driven inflation to a 20-year high are “clearly taking longer to dissipate than expected”.
“Monetary policy is of course the role and the task of the ECB, but the effect of higher prices on growth and on the purchasing power of those that we represent and serve is of course something that is concerning,” he said.
“Moreover, the factors that have influenced these prices are clearly taking longer to dissipate than expected, so in the meantime, we must remain vigilant and responsive.
“Spain, like my own country Ireland, has taken a series of measures to protect citizens, to protect economics, from the negative impact of higher prices, and particularly for energy prices.”
Mr Donohoe said it was “essential” that the issues of inflation and the high levels of public debt following the shutdown of economies all over the world to curb the spread of the virus are looked at “in a broad perspective”.
“That broad perspective for me is a protection of employment and protection of income in the face of a deadly threat that our peoples have had to confront over the past two years,” he said.
“If you look at where we have stood at different points over the past two years, we as policymakers looked at the possibility of the very economic fabric of the European Union coming under the most intense pressure, with the gravest of consequences for our future, and we responded to that challenge.
“While we do have new issues and new challenges that we have to overcome, I think as we debate those, we should do it in the context of also acknowledging what we have achieved over the past two years.
“Concepts like the recovery fund would have nearly been impossible a few years ago. Now they are happening. So that’s the spirit in which I look at the new challenges we are now confronting.”
On inflation, Mr Donohoe said the EU was working to mitigate the issue for citizens.
“I know for so many across Europe at the moment who have just worked through the trauma of maybe getting a job back, maybe keeping a business open, to now have to confront the change in the price of the standard of living is another challenge at the top of two years of lots of challenges,” he said.
“But again, as policymakers, whether we are finance ministers or those in the central banking community, we really understand the challenges this poses for citizens and for our recovery, and that is why at a budgetary level we have all taken steps to support citizens.
“Then at the European Union, we are working together to see what we can do to better deal with these challenges in the future and to reduce some of these effects that we are discussing.”
