Italy slams ECB for hiking borrowing costs as recession looms

The criticism comes after the European Central Bank raised interest rates by half a percentage point.

President of the European Central Bank (ECB) Christine Lagarde attends a press conference
President of the European Central Bank Christine Lagarde attends a press conference [File: Daniel Roland/AFP]

Three ministers from Italian Prime Minister Giorgia Meloni’s new right-wing government have publicly criticised the European Central Bank (ECB) for raising interest rates despite a looming recession in the eurozone.

The ECB on Thursday raised interest rates by half a percentage point and, like the US Fed a day before, kept further hikes firmly on the table to bring runaway inflation under control.

Italy’s Foreign Minister and Deputy Prime Minister Antonio Tajani said on Friday it was “fair” to criticise such moves because they harm economic growth, with fallouts for markets and households.

“I have always been very sceptical on the decision to raise rates in Europe,” Tajani said in an interview on RAI public radio, arguing that inflation in Europe is largely due to an external factor – the war in Ukraine.

Tajani’s remarks followed similar comments from defence minister Guido Crosetto, a close ally of Meloni and co-founder of her Brothers of Italy party, and Infrastructure Minister and Deputy Prime Minister Matteo Salvini.

“I don’t understand the Christmas present [ECB] President [Christine] Lagarde has decided to give Italy,” Crosetto wrote on Twitter on Thursday, alongside a chart showing a widening yield spread between Italian and German government bonds.

The BTP-Bund spread closed the day at 206 basis points, up sharply from 191 the day before.

“For anyone who hadn’t understood the effect of [ECB] decisions taken and communicated with superficiality and detachment,” Crosetto said in a second tweet beside a chart that showed the plunge in the price of Italian government bond futures.

Draining cash

Alongside its rate hike, the ECB on Thursday also laid out plans to drain cash from the financial system as part of a dogged fight against inflation.

This hit the eurozone’s weakest borrowers such as the Italian government, which has come to rely on the central bank as a major buyer.

Crosetto went further on Friday, writing on Twitter that raising interest rates “makes no sense” while raising capital requirements for banks and tightening sovereign bond purchases is “crazy”.

Salvini, on his part, had on Thursday called the ECB’s conduct “unbelievable, baffling, worrying”.

Source: News Agencies