Jean-Claude Trichet, a former president of the European Central Bank (ECB), said Wednesday the central bank and the government's policies should head toward the "same direction" as major countries struggle to tackle inflation.
Trichet made the remark as he emphasized the importance of "regaining control of inflation" during his meeting with the press on the margins of the G20 Global Financial Stability Conference, co-hosted by the finance ministry and the state-run Korea Development Institute.
Trichet said the world has been experiencing inflation since mid-2021 as major countries were "generally late in assessing the gravity of the inflationary threat."
"The post-COVID recovery triggered a sharp acceleration of the demand side whilst the scars of the crisis were still deeply weakening the supply side," Trichet said.
Trichet also said the on-going war "dramatically increased the price of energy and food, particularly for the European countries and for all the global economies that are significantly depending on imports in these fields."
With tackling inflation being the top priority for major countries, the former ECB president said it is important that the central bank and the government's policies head toward the same direction.
"We cannot let inflation (be) entrenched. I would say, (we need to) regain control of inflation," Trichet said. "Certainly, the central bank and the government (need) to go into the same direction, because one possible difficulty would be the government going in a direction which is contrary to the central bank."
Accordingly, Trichet said he would "certainly not criticize" the South Korean government for seeking a restrictive budget, but rather the move was "common sense" considering the high inflation.
"When you are in a situation, particularly a problem with inflation, it is good from the standpoint of the whole citizens to have a price stability," he added.
Last month, South Korea's finance ministry proposed a budget of 656.9 trillion won (US$492 billion) for 2024, up 2.8 percent from this year's budget of 638.7 trillion won. It slowed sharply from the previous year's 5.1 percent rise and marked the slowest on-year growth since 2005.
Some critics, however, expressed concerns that such a restrictive approach would weaken the future tax base.
Source: Yonhap News Agency