The energy shock has, in fact, caused a change in the terms of trade, a “tax” on the euro area economy that cannot be returned to sender and that cannot be eliminated through what would become a fruitless race between prices and wages, a race to which monetary policy would readily react, nor through excessive and permanent increases in public debt, which would put the burden on the younger and future generations.
To make up for the loss of purchasing power, the only solution could be to rely on sustained productivity growth, although targeted and temporary fiscal measures to alleviate the burden on more severely hit households and firms should obviously not be excluded.