“Containing inflation is a major challenge for the whole of Europe. Recovery from the COVID pandemic led to a strong increase in demand and the Russian war against Ukraine led to higher energy prices. After years of steady income growth, we are faced with a temporary drop in the standard of living, which inevitably creates difficulties for many people,” said Kallas. “The central banks and governments must react jointly to this perfect storm.”
The Prime Minister added that the price increase cannot be mitigated by a significant increase in expenditure. “We must help those who are struggling. But the general increase in benefits and the increase in public expenditure only turns inflation into a cycle. If our goal is to fight inflation and save people from falling below the poverty line, the budget deficit must be contained, not increased,” said Kallas.
According to Kallas, Europe is facing major economic challenges, where reforms are needed, especially in the energy and digital economy sectors. “In a perfect storm, it is important to have a strong financial system. Everyone must do their job, i.e. the central banks must ensure price stability and governments must ensure responsible fiscal policies. The care-free time for financial sustainability is over, we are moving back to a time when balance is important,” said the Prime Minister.
The Summit of European Union leaders will take place in Brussels on Thursday and Friday, where, among other things, Ukraine and Moldova received invitations to accede. Also support to Ukraine, economic issues and the future of Europe were discussed.
