The rising cost of living is “worrying” and “clearly taking longer to dissipate”, the finance minister said.
Culminating at an event in Madrid in his capacity as chairman of the 19-member Eurogroup, Paschal Donohoe said the EU “must remain vigilant and responsive” to inflation.
“The effect of rising prices on growth and on the purchasing power of those we represent and serve is, of course, something of concern,” Donohoe told a co-hosted conference. by the Spanish think tank, Real Instituto Elcano, and the Institute of International and European Affairs.
“And 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 reactive.
Last week, the European Central Bank (ECB) hinted that it could raise interest rates this year in an attempt to rein in rising prices, after eurozone inflation hit 5.1% in January.
ECB President Christine Lagarde said bank governors would return to the issue in March once new inflation projections were ready.
Spain‘s Economy Minister and Deputy Prime Minister Nadia Calviño, who spoke at Monday’s event alongside Donohoe, said energy prices were the “most worrying” and that the ECB has called it fair.
“My view on the ECB is that it is very aware of the risk of acting too quickly or too strongly, and therefore having a negative impact on growth and job creation.
“That’s my reading of their actions so far, and also their public statements.
“And I think that is indeed the right monetary policy to ensure the recovery strengthens, given the fact that the economic fundamentals in Europe are very different from those on the other side of the Atlantic. And right now, our priority should be growth and job creation.
Irish inflation hit 5% last month, according to Eurostat, after hitting a 21-year high of 5.7% in December (5.5% according to the Irish consumer price index).
The government is now considering cost cuts in health, energy, transport and education to ease pressures on citizens.
“I know for so many people across Europe right now, who have just gone through the trauma of maybe getting a job, maybe keeping a business open, now having to deal with the change in the price of the level life is another challenge on top of two years of many challenges,” Mr. Donohoe said.
“We really understand the challenge this represents for citizens and for our recovery and that is why, at the budgetary level, we have all taken measures to support citizens with this increase in the cost of energy, in particular.
“To the European Union [level] we are working together to see what we can do to better meet these challenges in the future.