ECB’s Villeroy: Despite Inflation Improvement, General Public Still Unconvinced

12 December 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Tuesday said that euro area citizens were still impacted by inflation and that, despite the recent improvement in inflation figures, consumers were not yet convinced that things had turned around.

Speaking at the Frankfurt School of Finance and Management in Germany, Villeroy said that there were currently three crises that resulted in Europe’s weakening, namely geopolitical, democratic, and economic and social, with the last of these related to rising prices.

‘[A]lthough we avoided the worst-case scenario of a European recession, our fellow citizens – especially the poorest among them - are being squeezed hard by inflation, which has eroded their standard of living. And while the figures are improving significantly, the overall perception remains a negative one’, he said.

Due to the quiet period before the ECB’s Governing Council meeting on Thursday, he said he would not speak about monetary policy. Instead, he merely noted the latest inflation data, saying, ‘Let me just recall that, after peaking at 10.6% in October 2022, inflation receded to 2.4% in the euro area last month.’

It was important to focus on structural challenges, such as the transformation of work and the digital and green transformations, now that the recent crises were ‘gradually fading away’, he said.

‘The European narrative in the 21st century – for our fellow citizens as well as for the rest of the world – should be how to reconcile growth and sustainability, prosperity and ecology’, he said. ‘And to achieve this promise, I firmly believe we have to harness the full potential of two strong economic levers: the single market and a financing union.’

He echoed ECB President Christine Lagarde’s view about the necessity of a new approach to the Capital Markets Union to achieve a green transition.

‘The climate transition can be financed, subject to a key prerequisite: that the private sector shoulders the bulk of the financial effort, and that we unlock cross-border capital flows for the transition’, he said.