Austria’s Finance Minister denounces that “high inflation” is an “expropriation” of the middle class


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“I am very concerned about the risk of permanently high inflation,” confesses Austrian Finance Minister Gernot Blümel, “experts argue about whether this will happen and I hope those who say that the current high inflation in Europe will only be right are right. temporary because a prolonged phase of higher inflation would be disastrous. ‘ “High inflation and low interest rates are the expropriation of the middle class,” the Austrian minister denounces, “in Germany and Austria in particular, many middle-class citizens with normal incomes still invest in their savings account. For them, the current constellation is like a tax on wealth. Blümel also fits a suggestion to Christine Lagarde, wishing out loud: “I hope that if inflation remains high, the ECB will make the right decisions.”

Another of its major concerns is Ecofin’s intention to begin to relax the regulations that put limits on public indebtedness in the euro zone. Hours before meeting with his European counterparts, Blümel has announced that the new Austrian chancellor will maintain the same tough stance against the European debt reform as his predecessor in office, Sebastian Kurz. “Kurz and Schallenberg perform similarly in terms of content and will continue to coordinate well in the future. Of course, everyone has their own style and their own way of formulating and that is where Alexander Schallenberg will be different from Sebastian Kurz. But a different style does not mean that Austria is less able to assert itself, “he said. In an interview with the German daily Die Welt, he calls for a more consistent application of EU debt rules and hints that he takes today’s meeting only as a warm-up party because the future German Finance Minister, who will not be appointed until at least the first week of December, will play a central role in the result.

Blümel opposes a relaxation of the debt rules and, in recent weeks, has started an alliance of like-minded countries. “No set of political rules is created to last forever and we have nothing against improvement. Modernization is fine, but simply loosening the debt rules would be a disaster, “he argues, in a context in which debt service is considerably cheaper than in 1990, when the Maastricht Treaty was signed and established current rules. “We cannot just assume that interest rates will always remain low and that growth will always be as strong as it is at the moment. It is an uncertain bet for an even more uncertain future. What happens when interest rates rise and economies grow slower? So, highly indebted countries have no more financial margin. We have had two global economic crises in the last 15 years and in both we have seen that countries with a high level of indebtedness had to be rescued by others. Only in the financial crisis and then the pandemic crisis, with the EU reconstruction fund, did a lot of money flow from financially strong EU countries to southern Europe. You cannot simply say: let’s keep it up. Europe must return to a stable fiscal policy. ‘

Blümel notes that “in recent years, heavily indebted countries have violated the rules and continued to borrow. Even in the current growth phase, we see that countries with traditionally higher debt levels are planning larger budget deficits. The problem is not that the debt rules are not flexible enough, but that they have been used with too much flexibility until now. Let’s compare that to road traffic. If speed limits are not respected, they will not be abolished, but will be more strictly controlled. ‘ Christian Lindner, leader of the German Liberal Party FDP and who could be the new German Finance Minister if the “traffic light” coalition currently under negotiation prospers, has also spoken in favor of a better application of the existing rules during the election campaign . “In the history of the EU, there has rarely been a situation where a single personnel decision in a Member State is so important to the stability of the EU.”Admits Blümel, “all of Europe is waiting to know who will become finance minister in Germany because that person will largely decide the long-term economic stability of the EU.” “I hope that the traditional German position will prevail that we need stable finances to ensure long-term growth and prosperity in Europe,” he adds.

Blümel also openly acknowledges that “the departure of Weidmann (President of the Bundesbank and member of the Council of the ECB) is a serious blow to sustainable monetary policy.” “Here, too, the next German government will have to make an important decision that will have considerable implications for Europe,” he warns, recalling that “while the US Federal Reserve is tightening its monetary policy at most a little and the European Central Bank still doubts, the Central Europeans have already taken action: several central banks in the region have raised their key interest rates and have made it clear that these were probably only the first steps.

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