“The game is not won,” warns ECB boss Christine Lagarde

In the Eurozone, inflation is slowly continuing to decline. But for Christine Lagarde, the president of the European Central Bank, the objective of inflation returning to 2% has not yet been reached and the battle continues.

Price increases slow to 2.5% over one year on average in the eurozone in June 2024, compared to 10.5% two years ago. This is much better, thanks to food and energy prices that are subsiding. But the 2% target set by the European Central Bank (ECB) has still not been reached. Hence the caution of Christine Lagarde, the president of the ECB, on Monday July 1 at the opening of the annual ECB forum organized in Sintra, Portugal. Economists are raising the risk that “the economy is hit by new shocks”, for example, delivery problems such as those for semiconductors or conflicts that would cause prices to soar.

This battle against inflation weighs on the legislative elections, because purchasing power has become the number 1 priority of the French. In recent years, the government has tried to counter inflation, to improve household income with aid, the distribution of checks, or even the creation of a tariff shield. The French have been more protected than elsewhere in Europe, but it has not been enough. We only have to take into account compulsory expenses, those that are difficult to reduce: the shopping basket, housing, electricity. These compulsory expenses weigh ever more heavily on household budgets: 1,130 euros on average, per month, or more than a third of their net monthly income. Not to mention that 22% of French people say they are overdrawn every month, and this, from the 17th of the month.

This is the paradox, for several months, wages have been increasing faster than prices. In the eurozone, they increased by 4.7% in the first quarter of 2024, compared to the same period in 2023. But, here too, these are averages which, by definition, do not reflect all individual situations. The minimum wage has increased more than other wages, because it is indexed to inflation, but the perverse effect is that more and more workers are on the minimum wage, almost one in five, or more than three million active workers. What about other remunerations which are not experiencing the same boost, which fuels downgrading and anger.

In fact, in this campaign, each camp has its own proposals and promises to improve purchasing power (increasing the minimum wage, lowering VAT, freezing prices, extending tax-free bonuses, etc.), all of which have one thing in common: putting a strain on the state budget.