The commercial war can reduce growth and inflation in the euro area, says the Cipollone, from PCs

A global commercial war can reduce both economic growth and inflation in the euro area and can have an “unequivocally recessive effect” in the countries involved, the member of the Council of Piero Piero Cipollone said Tuesday.

The Cypollone lines have strengthened the favorable topic for a new interest rate cut by the ECB in June and have also felt the risks of a more fragmented world, such as obstacles in the flow of capital and even the possible erosion of the status of dollars as a refuge.

“The recent increase in uncertainty on commercial policy can reduce the company investments of the Eurozone of 1.1% in the first year and the actual growth of the GDP of about 0.2 percentage points by 2025-26,” he said.

“The increase observed in the volatility of the financial market can imply a growth in GDP lower than about 0.2 percentage points by 2025.”

Although the impact on inflation is less clear, the short and medium -term -term effects can even be insinflationists of the euro area, added the chives.

He also clarified the deepest implications of the change of a world dominated by the United States and dollar in a world fragmented in economic blocks.

“If the long -term implications for higher rates are materialized, especially in the maximum inflation, a slower growth and an increase in the US debt, this could undermine trust in the dominant role of the dollar in commercial and international finances,” he said.

Cipollone added that the central banks must prepare for “sudden stops in capital flows, interruptions of payments and volatility in the exchange markets” through “solid planning structures of contingency and management of crises”, while the main economies should seek alternatives to protectionism.

Source: Terra

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