Eurozone Q1 2017 Report
The European Train Is Not Slowing Down
Prices are rising in the Eurozone, which create a false sense of euphoria at the European Central Bank (ECB). Nevertheless, a recent rise in energy prices explains almost entirely the increase in inflation. If we look at core inflation, we are still far removed from the ECB’s inflation target. Only recently, over the past few months, did core inflation increase.
The ECB also failed to stimulate credit growth, which is stagnant ever since 2014. Fortunately, the fact that prices do not rise and credit does not flow is having no negative consequences for the Eurozone economy. Despite the failure of the ECB to reach its objectives, the Eurozone economy is growing at a solid yet, above all, sustainable pace in the long term.
The only severe danger in the short run is the implementation of a negative interest rate policy, which is burdening the European financial system with a type of additional tax that prevents banks from finishing their restructuring efforts.