FRANKFURT, (Reuters) – Economic growth in the euro area could drop into negative territory this fiscal year. European Central Bank action is needed to reduce short-term high inflation. This would lead to economic collapse, Fabio Panetta, a member of the ECB Board said Wednesday.

With euro zone inflation at a record high 7.5%, the ECB is increasingly coming under pressure to tighten policy, even if the bulk of rapid price growth is due to high energy prices, which are largely outside the bank’s control.

Panetta declared in a speech, “Quarter on quarter growth rates will very low this year.” The war may have a negative impact on their ability to grow and could cause them to experience more severe effects.

Panetta argued that the oil and gas price will remain high longer, and that food prices may also rise more. Therefore it is very costly for the ECB’s to lower current inflation levels while its medium-term targets are still met.

He stated that instead of suppressing domestic demand, “we would have to dramatically reduce inflation.” “In practice we would need to increase the continuing sacrifices in real income made by the European economy.”

Panetta suggested that it is the governments that should address the crisis, providing tax relief or subsidies. She said that the ECB should not act if the high price of goods and services are threatening to raise or decrease inflation expectations.

“We do no see evidence for such second-round effect today,” he said.