A new episode of the trade war between Europe and the United States (US) could spell serious trouble for the European economy.
Christodoulos Patsalides, Governor of the central bank of Cyprus, warned that such tensions could lead to rising inflation and even a recession.
If things get worse, Europe could face a situation called stagflation, which means the economy stops growing, but prices continue to rise.
The tensions stem from the possibility of the US imposing tariffs on imports, as announced by President Donald Trump.
Europe, known for its large trade, may have to pay a higher price if these measures continue.
Patsalides mentioned that the European Central Bank (ECB) has cut interest rates this year to help the economy.
Another cut could come in December, depending on the latest data.
He stressed that these rate cuts must be cautious and evidence-based.
Inflation in Europe has been declining recently and is expected to stabilize around the ECB’s 2% target in the coming months.
However, there are still concerns about
