According to insiders, ECB President Lagarde believes that efforts to combat inflation are progressing smoothly, but the lack of regional fiscal rule agreements is gradually becoming a problem.
According to insiders, during a conference call on Monday, Lagarde told the chairpersons of the European Commission, European Council, and Eurogroup that the eurozone economy faces stagnation and downside risks in the coming quarters, but price risks have become more balanced. Due to the confidentiality of the discussion content, insiders requested anonymity.
Lagarde's confidence in combating inflation progress is in stark contrast to recent statements suggesting that basic inflation remains "high". Insiders said that regarding the economy itself, Lagarde stated that employment remains strong but shows signs of weakness.
Lagarde observed that the market often immediately responds to European differences or similar positions on the Middle East issue. She stated that if the EU does not strengthen unity, differences between different countries will widen.
She complained that the failure to reach an agreement on how to interpret the EU's Stability and Growth Pact in a timely manner when the deficit limit was restored to 3% of GDP in January was a problem, as it could bring pressure to take more action on monetary policy.
According to insiders, Paschal Donohoe, the chairman and finance minister of the Eurogroup, responded that the risk of reaching an agreement this year is indeed high, and although feasible, it is very difficult.
European Council President Charles Michel stated that due to significant differences in stance, it is difficult to reach a compromise on fiscal rules.
These remarks provide an important perspective for discussions among senior European officials. The market expects the European Central Bank to maintain interest rates unchanged at its meeting in a few days.
Spokespersons for the European Central Bank, Donohoe, and Michel did not comment on the content of the conference call.