As reported by «Market Leader» (US)
Does the European Union really need unity?
The European Central bank has recently been trying to look very tough and determined. The ECB increased its Official Bank Rate for the first time in 3 years exactly on the same day when Portugal asked for financial aid. However the increase was insignificant, so it probably was of psychological rather economic nature. Obviously that was a step towards toughening the monetary policy. However the step was an indecisive one.
The inflation problem is the key one in the EU right now. It is clear that even an interest rate increase cannot have a significant impact on the inflation dynamics. At the moment there are at least 3 problems that cannot be avoided when developing anti-inflation measures: the continuous debt crisis, the inflation pressure of the global economy and the structure of the ECB itself.
When considering the sovereign debt problem, it should be noted that the ECB’s interest rate grew when Portugal addressed the ECB, so Greece and Spain “missed the train”. It appears that now they lack an opportunity to attract funds.