Europe’s economy is nearing the end of a malaise that has resulted in more than a year of near stagnation, European Central Bank (ECB) President Christine Lagarde said on Wednesday.
Output in the eurozone is “recovering and we are clearly seeing signs of recovery,” Lagarde told the Council on Foreign Relations in Washington. “We haven’t had a recession, but it’s been very, very slow and meager, [but] you have an employment and a job market which is phenomenal.”
The ECB is almost certain to cut interest rates at its next meeting in June — offering some support for growth — although what happens after that is increasingly uncertain.
Photo: AFP
That is in part because of the US Federal Reserve, whose chair Jerome Powell on Tuesday signaled that officials would wait longer than previously anticipated to reduce borrowing costs following a series of surprisingly high inflation readings.
A prolonged period of monetary easing in Europe with the US not acting to the same extent could dent the euro, with Lagarde saying officials would watch fluctuations “very carefully,” despite not targeting a particular level.
“While we have a single mandate with a primary objective of price stability, obviously we have to take into account the impact that exchange-rate variations will have on our inflation,” she said. “That movement of currencies may have an impact on inflation by way of imported inflation.”
Tensions in the Middle East are another risk factor, she added.
From supply-chain disruptions following the COVID-19 pandemic to an energy crisis after Russia’s invasion of Ukraine, Europe’s economy has faced multiple challenges, but it mignt yet face its biggest — the clean energy and digital transitions that Brussels has made its priority in the coming years would require additional annual investment of nearly 620 billion euros (US$660 billion).
From artificial intelligence to solar panels, from computer chips to batteries, the EU is fast losing ground on innovation to other global powers.
The EU has been put further on the back foot as China and the US have plowed billions of dollars of state aid to prop up their critical industries.
What is needed is “radical change,” former ECB president Mario Draghi said during a speech in Belgium on Tuesday, pointing to “other regions [that] are no longer playing by the rules.”
“Our major competitors are taking advantage of the fact that they are continental-sized economies. We have the same natural size advantage in Europe, but fragmentation is holding us back,” Draghi said.
The former Italian prime minister, increasingly touted as a potential successor to Ursula von der Leyen as European Commission president, is to present a report on the issue in the summer.
Additional reporting by AFP
Semiconductor shares in China surged yesterday after Reuters reported the US had ordered chipmaking giant Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to halt shipments of advanced chips to Chinese customers, which investors believe could accelerate Beijing’s self-reliance efforts. TSMC yesterday started to suspend shipments of certain sophisticated chips to some Chinese clients after receiving a letter from the US Department of Commerce imposing export restrictions on those products, Reuters reported on Sunday, citing an unnamed source. The US imposed export restrictions on TSMC’s 7-nanometer or more advanced designs, Reuters reported. Investors figured that would encourage authorities to support China’s industry and bought shares
FLEXIBLE: Taiwan can develop its own ground station equipment, and has highly competitive manufacturers and suppliers with diversified production, the MOEA said The Ministry of Economic Affairs (MOEA) yesterday disputed reports that suppliers to US-based Space Exploration Technologies Corp (SpaceX) had been asked to move production out of Taiwan. Reuters had reported on Tuesday last week that Elon Musk-owned SpaceX had asked their manufacturers to produce outside of Taiwan given geopolitical risks and that at least one Taiwanese supplier had been pushed to relocate production to Vietnam. SpaceX’s requests place a renewed focus on the contentious relationship Musk has had with Taiwan, especially after he said last year that Taiwan is an “integral part” of China, sparking sharp criticism from Taiwanese authorities. The ministry said
US President Joe Biden’s administration is racing to complete CHIPS and Science Act agreements with companies such as Intel Corp and Samsung Electronics Co, aiming to shore up one of its signature initiatives before US president-elect Donald Trump enters the White House. The US Department of Commerce has allocated more than 90 percent of the US$39 billion in grants under the act, a landmark law enacted in 2022 designed to rebuild the domestic chip industry. However, the agency has only announced one binding agreement so far. The next two months would prove critical for more than 20 companies still in the process
CHANGING JAPAN: Nvidia-powered AI services over cellular networks ‘will result in an artificial intelligence grid that runs across Japan,’ Nvidia’s Jensen Huang said Softbank Group Corp would be the first to build a supercomputer with chips using Nvidia Corp’s new Blackwell design, a demonstration of the Japanese company’s ambitions to catch up on artificial intelligence (AI). The group’s telecom unit, Softbank Corp, plans to build Japan’s most powerful AI supercomputer to support local services, it said. That computer would be based on Nvidia’s DGX B200 product, which combines computer processors with so-called AI accelerator chips. A follow-up effort will feature Grace Blackwell, a more advanced version, the company said. The announcement indicates that Softbank Group, which until early 2019 owned 4.9 percent of Nvidia, has secured a
RSS