ROME, Dec 17 — The European Central Bank’s (ECB) interest rate policy is damaging Europe’s economy and helping Russia undermine Western solidarity for Ukraine, the Italian defence minister said on Friday.
The ECB on Thursday raised its benchmark interest rate by 50 basis points as widely expected, but dashed hopes that such hikes were coming to an end, warning instead of further increases in the months ahead.
Italian Defence Minister Guido Crosetto, a senior figure in Prime Minister Giorgia Meloni’s Brothers of Italy party, told Reuters that the threat of fresh tightening was driving up borrowing costs and hurting an already weak economy.
“We are creating a situation from an economic and social point of view that is Russia’s best ally right now,” he said. “That is why it is even more absurd what (ECB President Christine) Lagarde did,” he added.
Crosetto said Russia was hoping to take advantage of the continent’s economic crisis and put pressure on Europe to stop supporting Ukraine in an effort to bring the war to a rapid end and ease the energy crisis triggered by the Russian invasion.
“The Russia war is also a psychological war that is being fought in the squares of Europe besides in Ukraine. They have the advantage, from their viewpoint, of dealing with democracies,” he added.
ECB policymakers from across the euro zone have defended the bank’s decision, saying tough action was needed to bring euro zone inflation, currently at 10 per cent, back to the ECB’s 2 per cent target.
But Crosetto said the ECB was failing to see the bigger picture and was just following economic theory. He urged Lagarde to address the concerns of businesses hit by her policies.
“You have to justify this politically to your European citizens. You are not a Martian,” he said, adding that the economic landscape for Europe was worse now that it was during the Covid-19 pandemic.
“They behaved one way with Covid, and in a completely different way now, as if we had economic growth, as if everything was fine, as if there was no war,” Crosetto said.
Such high-level political criticism of the independent ECB is highly unusual, and it was echoed by other members of Italy’s conservative government, which took power in October.
Deputy Prime Minister Matteo Salvini branded the ECB’s conduct “unbelievable, baffling, worrying”.
Higher rates mean higher borrowing costs for Italy, which has the second highest debt mountain in Europe after Greece, limiting the government’s ability to boost spending and meet its myriad promises made ahead of the September general election. — Reuters
