For Austria, a recession has less serious consequences than inflation. And there is still a lot of catching up to do when it comes to combating it – because the country is “not out of the woods yet,” says Austrian National Bank Governor Robert Holzmann.
However, the current escalation in Israel will not have a major impact as long as the conflict does not spread, the expert explained on Tuesday during a discussion at the Austrian Academic Association.
Unlike the US, Europe does not have a development goal, but only a price goal that it strives for. Accordingly, the recession will not be taken into account as long as the “main goal” is not achieved. However, for various reasons we will not deviate from the target two percent, says Holzmann.
On the one hand, you lose credibility if you change goals along the way. On the other hand, the difference between two and four percent inflation is much greater than you might think at first glance. Furthermore, it is no coincidence that all major economies aim for two percent inflation; according to current knowledge, this is the almost perfect inflation rate.
Criticism of “unconditional distribution of money”
Both Holzmann and Paul De Grauwe of the London School of Economics (LSE), who also took part in the panel discussion, also criticize the ‘unconditional’ distribution of money and the transfer of profits and losses from central banks to commercial banks. Approximately one percent of GDP annually cannot be used for other purposes.
Source: Krone
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