Luis de Guindos, ECB Vice-President, discusses market stability, financial risks, housing, and euro area economic prospects in an interview with El Periódico.
Luis de Guindos, Vice-President of the European Central Bank (ECB), conducted an interview with Pablo Allendesalazar of El Periódico. He highlighted that despite significant shocks since the pandemic, European banks remain resilient due to structural reforms, including the Single Supervisory Mechanism and Basel regulations.
De Guindos noted that the euro area economy is growing below its potential of 1-1.5%, but is more resilient to shocks. He discussed risks related to artificial intelligence valuations, noting that while there is no bubble, valuations could correct if optimistic narratives do not materialize.
The interview addressed risks from the non-bank financial sector, emphasizing the need for global regulation and integrated supervision within Europe, given the interconnectedness with the banking sector. He also discussed fiscal stability, mentioning that some euro area countries face weak fiscal fundamentals and political fragility, which could impact investor confidence.
Regarding Spain, de Guindos attributed its better-than-average growth to population increases driven by immigration, a robust financial system, and EU recovery funds. He acknowledged housing market overvaluation and the need for regulation to promote rental supply, warning that current measures should not reduce supply.
He explained that macroprudential measures are being considered to prevent a housing bubble similar to 2008, but emphasized that the current situation differs significantly from the pre-crisis period. Concerning monetary policy, de Guindos stated that current interest rates are appropriate, but remain flexible depending on economic data and geopolitical developments.
The ECB Vice-President discussed ongoing efforts to simplify banking regulation without compromising resilience, including proposals for capital structure and supervision. He stressed the importance of completing the European deposit insurance scheme and addressed the debate over bank merger approval powers, suggesting that a change in approach could be possible given improved bank stability.
On the digital euro, de Guindos expressed support, emphasizing its role in reducing dependence on US payment systems and enhancing European independence. He also highlighted the importance of central bank independence for controlling inflation and interest rates.
Finally, de Guindos reflected on his future plans, ruling out a return to politics, and mentioned potential academic roles. He discussed Spain’s representation in ECB leadership, emphasizing the importance of having a strong national presence, and acknowledged the achievements of former Governor Pablo Hernández de Cos.
