Luis de Guindos, ECB Vice-President, discusses central bank independence, inflation, fiscal policy, geopolitical risks, and economic prospects in an interview conducted by Luís Reis Ribeiro.
Luis de Guindos, Vice-President of the European Central Bank (ECB), conducted an interview with Luís Reis Ribeiro covering various topics related to monetary policy, inflation, fiscal challenges, and geopolitical risks.
He emphasized the importance of central bank independence for maintaining inflation control and market confidence. He cited the ECB’s experience in 2022, when despite inflation exceeding 10%, expectations remained anchored around 2%, demonstrating trust in the ECB’s independence.
Regarding inflation, he noted that consumer expectations are aligned with the ECB’s target of around 2%, with falling services inflation and stable wage growth supporting this outlook. He also discussed the impact of global trade uncertainties, tariffs, and geopolitical tensions, including conflicts in Ukraine and the Middle East, on economic stability.
Guindos highlighted concerns over fiscal policy, noting euro area countries’ varying fiscal positions and increased defense spending commitments. He mentioned that market calm could change if fiscal sustainability is not maintained.
He addressed the challenges faced by countries like France, Spain, Portugal, and Greece, emphasizing the progress made in fiscal consolidation and debt reduction, with Portugal’s debt ratio forecasted to hover around 80% in the coming years.
The ECB’s stance on interest rates was described as appropriate at the current level of around 2%, with potential adjustments if inflation or projections deviate. The outlook for economic growth remains modest, with a projected growth rate slightly above 1% until 2027, below potential growth, partly due to employment and immigration dynamics.
Guindos discussed Europe’s strategic challenges, including defense spending, energy dependence, and regulatory reforms to foster investment. He also commented on the banking sector’s stability, including Novo Banco’s situation, and the regulation of non-bank financial institutions, such as hedge funds and investment funds.
The digital euro was explained as a natural evolution of cash, not a competitor to bank deposits, with issuance expected around 2029 if approved in 2026. Guindos reflected on his tenure, citing the pandemic and energy crisis as major challenges, and highlighted the ECB’s resilience and effective supervision in avoiding major crises.
