By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Fabio Panetta warned on Thursday that rising energy prices and higher borrowing costs were weighing on economic growth, particularly in Europe, where economic activity remains weaker than in the United States.

Speaking at the Turin International Festival of Economics, Panetta, who also heads the Banca d’Italia, said that “there has been an increase in energy prices and energy products, an upward effect on inflation and, obviously, a push that has held back growth.”

He noted that the recent increase in government bond yields was a pan-European phenomenon, but stressed that its origins lay largely in the United States, where economic growth and inflation have exceeded expectations.

"The epicenter of the rise in interest rates that we have seen in recent weeks is in the United States," Panetta said, pointing to stronger-than-expected economic activity, upside inflation surprises and expectations of adjustments in US monetary policy rates.

He also highlighted growing competition for savings between the US government and large technology companies, which are increasingly raising substantial amounts of debt to finance their activities.

"It is not surprising that interest rates in the US, especially long-term rates, are increasing," he said, adding that the country's growing public debt and significant fiscal deficit were also contributing factors.

Panetta explained that US financial markets exert a disproportionate influence on global long-term interest rates, meaning that increases in US yields tend to spill over into other markets, including Europe.

Within the euro area, the impact has varied depending on countries' fiscal positions, he said.

Germany has experienced smaller increases thanks to its sound public finances, he said, while Italy has seen somewhat larger moves because of its elevated debt, despite a considerably improved underlying fiscal outlook compared with the past.

France, meanwhile, has been more heavily affected because of its persistently high debt and fiscal deficit, Panetta said.

"The problem is that this increase in interest rates in the United States is taking place against the backdrop of a growing economy," he said. "In Europe, the economy is growing less and is less robust, so the impact of this rise in interest rates is greater."

"It is not contagion, it is not a crisis, but it is something that weighs on growth," he said.