Europe predicted inflation and loss of competitiveness 12:15

Any attempt to reduce import dependence and further encourage domestic production in Europe could lead to serious economic costs. writes about this “Kommersant” Referring to the ECB working paper.

The authors of the study analyzed the medium and long-term effects of replacing imported resources used in the production of export goods with their own resources. The most likely consequences of such import substitution include accelerating inflation, a decrease in the productivity and competitiveness of European companies, and a decrease in global trade volumes.

According to ECB economists, the use of more expensive and lower quality local resources instead of imported ones will cause the prices of European producers’ products to rise. At the same time, their productivity will decrease due to poor production conditions. Additionally, retaliatory measures by EU trading partners may have a negative impact on global trade volumes.

In the long term, the quality of local companies’ products may decrease due to the loss of international competition in Europe. The transition period will require significant costs, and these costs will increase over time in an environment of rising inflation.

The ECB report points out that a reasonable alternative is to seriously limit import substitution policies. Economists recommend applying this method only to goods whose supply can actually be disrupted. There should also be a focus on import substitution in industries that already produce competitive products.

ECB staff at the end of January appreciated Lagarde’s work is negative.

Previously EU regulator frozen main rate.

What are you thinking?

Source: Gazeta


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