The European Union has been running out of room to cut spending and inflation has been rising, the European Central Bank warned on Friday.
Inflation has reached its highest level since the global financial crisis.
In a new report, the ECB said its current account surplus – which includes trade – stood at a record £1.6bn in the third quarter of 2018, compared to a deficit of £1bn the previous year.
It said that while this was “significantly below” the average over the past 10 years, it still amounted to a surplus.
The ECB said it had a surplus of €1.3bn in 2017, compared with a deficit at the same time of €2.3 billion.
“A balanced budget is needed to ensure that inflation and other costs can be managed,” said Olivier Blanchard, head of the ECB’s economics department.
The ECB had forecast the third-quarter surplus to be €2bn, compared by a deficit forecast of €800m. “
Inflation is still very high, unemployment remains high, and growth remains weak.”
The ECB had forecast the third-quarter surplus to be €2bn, compared by a deficit forecast of €800m.
It has been warning for years that the eurozone is in a deep recession.
The eurozone economy is expected to shrink by 0.7% this year and by 2.6% next year, the worst forecast of any central bank.
The central bank has warned the eurozone economy could suffer another recession if the ECB does not act now.
“The ECB will have to take measures if the eurozone’s current account balance is to remain balanced,” Blanchad said.
Inflation was up to 6.1% in 2018, the fastest rate since the end of the global recession in 2008. “
Such interventions should be gradual and targeted.”
Inflation was up to 6.1% in 2018, the fastest rate since the end of the global recession in 2008.
The average monthly price of food, excluding fuel, rose by 3.5%, the highest rise since 2011, the report showed.
The index for food prices rose by 4.4% in September.
On a year-on-year basis, inflation rose by 0% in the year to September, compared the same period last year.
The report comes as the ECB is expected in the coming weeks to announce an increase in the maximum amount that a bank can lend a member state to buy its bonds.
A move that would boost the economy could boost confidence in the eurozone.
The euro zone’s finance ministers are due to discuss the idea of printing money on Wednesday.
The European Central Banks chief Mario Draghi has also urged the European Commission to consider a loan swap, which would allow the bloc to offer its countries cheaper loans to help them repay debt.
The German government said on Thursday it was concerned by the ECB plan.
“I don’t want to give too much detail but we do have serious concerns that this could be a step towards the euro area getting into an even deeper recession,” said Wolfgang Schäuble, the finance minister.
“What we need is a full-blown financial rescue, something we have never had before,” he told a news conference.
“It’s not a solution we want but we don’t have the luxury of waiting.”
The European Commission will discuss the ECB proposal on Wednesday with its European Council partners.
“Our European colleagues are not prepared to accept the ECB idea of a loan swapping and it will be discussed at the next meeting,” said Joaquin Almunia, the head of EU affairs at the European Parliament.