Price stability in the eurozone is achieved, but the European economy requires urgent government actions

Inflation in the eurozone has reached its stabilization target, as confirmed by European Central Bank authorities in recent statements. The current scenario points to an important inflection point: after a period of controlled deceleration through successive monetary adjustments, prices are converging toward the 2% goal established as consistent with medium-term balance.

The Role Already Played by Monetary Policy

ECB President Christine Lagarde emphasized that the institution is in a solid position at this moment. The conclusion is straightforward: monetary policy tools have fulfilled their function. The tightening and easing measures adopted over the past year have produced the expected results, allowing families and businesses to receive support during critical periods. The last four Governing Council meetings kept interest rates unchanged, reflecting an assessment that further adjustments are not justified in the current context.

The mechanism is well known: when interest rates rise, credit becomes more expensive and demand decreases; when they fall, they encourage consumption and investment. The current moderation signals that the central bank diagnoses price stability and the absence of significant inflationary pressures.

The Critical Point: Economic Growth Remains Fragile

Here lies the paradox. With inflation under control, a different and perhaps deeper challenge emerges: European economic growth appears weak. This fragility cannot be resolved through interest rate adjustments. The ECB has already done what is within its mandate. Now, responsibility shifts to national governments and European institutions.

The European Union has a considerable strategic asset: a single market integrating 450 million consumers. In theory, this should provide significant competitive advantages. In practice, for these potentials to materialize into robust growth, deep structural reforms are indispensable.

Structural Reforms as an Essential Path

According to analyses by members of the Governing Council, especially the Governor of Banco de Portugal, the necessary changes encompass multiple dimensions. Improvements in cross-border commercial operations, facilitation of workforce skills development, modernization of infrastructure, and streamlining of business processes are essential components.

The European single market theoretically eliminates barriers between member countries, enabling unobstructed trade exchanges. However, regulatory inefficiencies, technological asymmetries, and structural rigidities continue to limit the full exploitation of this potential. Governments need to act to remove these bottlenecks.

Why Price Stability Matters Beyond the Numbers

When prices rise rapidly, essential items like food, electricity, and transportation become inaccessible to a large part of the population, creating real poverty. Conversely, prolonged deflation undermines business profitability and causes unemployment. The central bank’s goal is to ensure that prices rise gradually, around 2% annually – a pace that balances consumption and investment without destroying purchasing power.

This balance has been achieved. But the ECB is explicit: its toolkit has limits. Monetary rules alone are not enough. The European Commission and national governments must now lead the implementation of reforms that allow Europe to capitalize on its competitive advantages and resume a trajectory of sustainable growth.

The message is clear to European leaders: the central bank has fulfilled its role. Now, it is up to governments to demonstrate equal determination in the necessary transformations.