The good first. What is doubtful, later. A great measure in favor of health personnel that gives hope to thousands of positions that have been interim for too many years. What raises many doubts are the new taxes on big banks and energy companies (electricity, gas and oil). They are exceptional and temporary. To the bank, 1,500 million on the benefits of 2022 and 2023. For the banking employers, it is a "legal improvisation". The extra profits that the big banks can obtain when the ECB raises interest rates and pass them on to loans are taxed. To the energy companies (large electric, gas and oil companies) a tax of 2,000 million for the years 2022 and 2023. Is it intended to recover the benefits that fell from the sky? In reality, they are paid by consumers.
But the big problem is inflation. The price of fuel increased by 40.7% over the previous year. 42.7% diesel, and gasoline 34.4%. Core inflation, which is obtained by discounting unprocessed food and energy products, reaches 5.5%. Before Putin's war, the price of gas had already risen by 50%, but tripled when the war broke out. All industrial metals so far this year are down 35% in dollar terms. It is not risky to point out that perhaps they anticipate a next recession. Copper is given a predictive value. It was once quoted at $10,845 per tonne, but later fell to $8,000.
The behavior of some prices is explained by the war. At a meeting of the three big diesel producers, according to the Financial Times, it was said that prices would have to rise to levels more typical of strong activity. The increases have occurred, and the strikes of the truck drivers in Spain obtained subsidies from the central government, but hardly had an impact on the variations in economic activity. In reality, we are suffering from the effects of speculation. Most of the money that was invested in raw materials did not come from large industries, but from speculators who in a few months accumulated future purchase orders of over 145,000 million dollars. It was not to manufacture, but to speculate (The Economist). Currently, inventories of industrial raw materials are below the average of the years of strong activity.
The president of the ECB, Christine Lagarde, pointed out that inflation in the euro zone is due to two types of shocks. Energy, food and industrial prices accounted for 80% of the inflation rate throughout 2022. Putin's war explains other increases. For Lagarde, wages may increase by 4% in 2022 and 2023 and by 3.7% in 2024. She is concerned about the second-round effects, when margins are passed on and feed further increases in inflation. Let's expect increases in euro interest rates.
Emeritus Professor at URL and former Dean of Esade Business School
