By Kang Yoon-seung
SEOUL, Sept. 20 (Yonhap) — Jean-Claude Trichet, a former president of the European Central Bank (ECB), declared Wednesday that the central bank and the government’s policies should be in sync as major countries attempt to tackle inflation.
Trichet made the comment while stressing the importance of “regaining control of inflation” during his press conference at the G20 Global Financial Stability Conference, co-hosted by the finance ministry and the state-run Korea Development Institute.
Trichet acknowledged that the world has been dealing with inflation since mid-2021 since major countries were “generally late in recognizing the severity of the inflationary threat.”
“The post-COVID recovery triggered a sharp acceleration of the demand side while the scars of the crisis were still severely weakening the supply side,” Trichet said.
The former ECB president further stated that the ongoing war has “drastically increased the cost of energy and food, especially for the European countries and for all the global economies that are heavily reliant on imports in these fields.”
In light of this, Trichet stated that it is essential for the central bank and the government to take the same approach in tackling inflation. “We cannot let inflation become entrenched. I would say, (we need to) regain control of inflation,” Trichet said. “Certainly, the central bank and the government (need) to go in the same direction, because one possible difficulty would be the government going in a direction which is contrary to the central bank.”
Consequently, Trichet remarked that he would “certainly not criticize” the South Korean government for proposing a restrictive budget, but rather the move was “prudent” considering the high inflation. “When you are in a situation, particularly a problem with inflation, it is advantageous from the standpoint of the whole citizens to have a price stability,” he added.
Last month, South Korea’s finance ministry proposed a budget of 656.9 trillion won (US$492 billion) for 2024, up 2.8 percent from this year’s budget of 638.7 trillion won. It slowed sharply from the previous year’s 5.1 percent rise and marked the slowest on-year growth since 2005.
Some critics, however, expressed worries that such a restrictive approach would weaken the future tax base.
Jean-Claude Trichet, a former president of the European Central Bank, speaks during the G20 Global Financial Stability Conference held in Seoul on Sept. 20, 2023. (Yonhap)
colin@yna.co.kr
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