The seven most industrialized countries in the world want to counteract high inflation rates with “measures” in a coordinated way. “The G7 is determined to take consistent measures to stop inflation and boost growth,” German Finance Minister Christian Lindner, host in Königswinter, near Bonn, said on Friday of the meeting with his colleagues and with the presidents of the G7 central banks. “We see inflation as a huge threat to further economic development and, in particular, to progress”, he explained about the high level of consensus during the deliberations, “central banks are very independent on the one hand, but they also have a great responsibility in these.
In his appeal to central banks for a fast course of interest rate hikes, Lindner was quite direct, but he also made a call, from the rotating presidency of the G7, to governments, urging them to cut their spending policies. “It is clear for state fiscal policy that we have to get out of political approaches more and more”, he emphasized, “this is not the time to stimulate state demand and subsidies”. “We have to reduce our deficits, we have to get out of the broad-based spending programs that are putting additional pressure on the”, pointed to spendthrift governments as complicit in the development of inflation. “Rather, in a return to free market policies, the side of the supply, a growth in production and an expansion of production capacity is necessary”, he said in the presentation of the conclusions of the meeting, and reported that this political approach was “represented to” at the meeting of l G7.
Bundesbank President Joachim Nagel, who was also hosting, said for his part that even if fiscal policy “correctly jumped into the void” due to the pandemic, it should now reduce new lending as soon as possible. “Now is the time to fight inflation,” he said. “Central banks need to make sure the strong inflation we’re seeing doesn’t take hold.” In his opinion, the central banks are called and must ensure that the very strong upward pressure on prices does not take hold. “That means we have to act decisively,” he translated. “When the net purchases of bonds are completed, which could possibly be the case in June, then I see the time for a first interest rate hike,” he said about what to expect from the next meeting of the Governing Council of the ECB.
“It is possible that this will happen already in July, and then there could be more rate increases,” he reiterated, and also stressed that for the euro zone it is important that “the change in the trend of monetary policy begins”, which must “remain alert” and, if necessary, take further action to ensure price stability in the medium term. At a time when the most industrialized economies are already facing the next crisis, precipitated this time by the global economic fallout from the Russian invasion of Ukraine, Lindner spoke out against establishing more EU funds based on the Recovery Fund, used to counteract the economic effects of the pandemic.
“Germany rejects further additional funds along the lines of the ‘EU Next Generation’ for any purpose,” he said, criticizing a possible extension of exceptions related to the EU Stability Pact. “I am in favor of a decision based on data. In our opinion, the data is not such as to make another lifting of the regular rules of the Stability Pact mandatory”, he put limits on the southern aspirations. “Germany, in any case, will not make use of it”, she distanced herself from an approach capable of damaging the reputation of a country’s debt.
On the contrary, he advanced that “Germany will again observe the debt limit established by the Basic Law next year” to abandon the state of financial exception. The G7 finance ministers, meanwhile, have committed $18.4 billion in transfers and loans to help Ukraine meet its immediate financial needs. “We have mobilized $18.4 billion of budget support, including $9.2 billion of recent commitments in the run-up to the Petersberg meeting, to help Ukraine close its financial gap and continue to ensure the provision of basic services to the Ukrainian people.” , affirms the final communique of the meeting.
Funds that Ukraine’s Prime Minister Denys Shmyhal said would hasten kyiv’s victory over Russia and are just as important as “the weapons you provide.” Shmyhal wrote on Twitter: “Partner support will accelerate our victory. Despite Russia’s efforts to destroy our economy, together we will win! The Ukrainian government has estimated its financial needs at 5,000 million euros per month and the purpose of the G7 is to keep open a financial flow that covers that amount. Germany contributes one billion euros. US Treasury Secretary Janet Yellen summed up for US journalists that “the message is: ‘We support Ukraine. We’re going to come together and we’re going to provide the resources they need to get through this.”
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