LyrArc Article Gist
Inflation in the European Union is being pushed up by higher profit margins of companies as they push up prices. Wage pay rise is only part of the problem, says Mr. Panetta, an executive board member of the ECB. Profit margins at public companies in the eurozone were pushed up from 7.2% in 2019 before the pandemic to 8.5% for the year through March 2023. A similar situation exists in the US. Companies could be increasing prices to make up for input price rises, anticipating future price inceases, or with market power to take advantage of  the situation, says Panetta.

Panetta says his job on the 6 member executive board team of ECB is to look at all the causes of inflation. He has found sectors where even when input prices are decreasing profit margins and profit are increasing, a cause for concern. At a conference in Frankfurt last week Panetta pointed out that about half of the pressure for inflation came from wages, the other half from rising profits. In Europe wages rise is slower than in the US. It is also seen that market power of European companies was higher than in the US last year.