Euro nations seek path between high inflation, weak growth

BRUSSELS (AP) — Euro finance chiefs on Monday engaged in a high-wire political balancing act prompted by conflicting economic forces: a weaker growth outlook and stronger inflation.

Finance ministers from the 19 nations that share the common euro currency pledged continued budgetary stimulus for the European economy amid headwinds caused by the highly transmissible omicron variant. At the same time, they sought to reassure voters by pledging vigilance over sharp price rises.

“Am I concerned about inflation? Obviously so,″ Dutch Finance Minister Sigrid Kaag told reporters in Brussels before entering a meeting with her euro zone counterparts. “The purchasing power of the individual citizens will be affected.”

The euro zone faces a slowdown in economic growth this year after a solid recovery in 2021 from a severe coronavirus-induced recession two years ago. But surging inflation, which reached a record 5% in December and is tied to an energy-market squeeze, has complicated the picture — for both policymakers and voters.

Ioanna Orfanou, a small-scale producer of olives and pomegranates along the central-eastern coast of Greece, said the prices that she pays for fertilizers and insecticides jumped to alarmingly high levels in the second half of last year.

“This trend is very worrying,” Orfanou told the AP. “It gets harder for small farmers to stay in business because we have limited room to pass on the cost increases to average consumers.”

Such sentiments have helped spark questions about the European Central Bank’s policy of keeping the euro zone money supply loose to fuel economic activity.

The Frankfurt-based ECB has offered support in two key ways: maintaining its interest rates at zero or less and helping to keep other market borrowing costs low by purchasing...