Euro

The United States is in turmoil, and so is its currency. Since Donald Trump slapped tariffs on all imports, global markets have retreated. His unrelenting attacks on Federal Reserve Chairman Jerome Powell then further shattered confidence in American monetary stability.

The European Central Bank’s decision to cut interest rates for the first time since 2019 reflects a pivotal shift in Eurozone’s monetary policy, attempting to balance economic and political risks amidst lingering inflationary concerns and divergent national interests.

The continent ends 2022 with a war in its east, grappling with political uncertainty, and plagued by high inflation. It has been a year many Europeans would prefer to forget.

To make the Eurozone more stable, it would be desirable to have stricter and enforceable rules. But because it is so unstable, no such rules can ever be introduced.

European monetary policy has previously smashed the fragile plates of the Greek economy to the floor; 12 years on, they’ve finally pieced it all back together

The moderate increases in the European Central Bank’s interest rates are far from being brutal but the writing is on the wall that Europe’s monetary party is about to end, and Southern Europe has remarkable parallels to Mexico and Latin America in the 1980s.

Europe will face difficult monetary conditions for years to come. If the bank is unlucky, inflation expectations will solidify, and rapid price increases will become a permanent feature for the Eurozone.

Once upon a time, central bankers did not tweet. And perhaps that was just as it should be.