Luis de Guindos, ECB Vice-President, discusses the impact of the Middle East war on the euro area economy, monetary policy, fiscal measures, and Spain’s economic prospects in an interview conducted on March 20, 2026.
In an interview conducted on March 20, 2026, ECB Vice-President Luis de Guindos discussed the expected economic impact of the Middle East conflict on the euro area. He stated that the conflict will significantly affect growth and inflation, with the impact increasing with the conflict’s duration and spread.
The ECB’s baseline scenario assumes energy prices peaking in the second quarter of 2026, followed by a sharp decline. An adverse scenario considers the crisis lasting until the third quarter of 2026, with a slower normalization, while the severe scenario projects a prolonged crisis with higher prices lasting into early 2027.
De Guindos emphasized that a recession in the euro area is unlikely, even in severe scenarios, as positive growth is expected. The ECB is adopting a data-dependent approach regarding interest rate changes, monitoring inflation, inflation expectations, and energy prices, without pre-committing to rate hikes or cuts.
The Vice-President highlighted the importance of fiscal policy, especially the need for temporary, targeted measures to mitigate the energy shock, and noted that the European Commission will decide on suspending deficit rules. He also discussed the limited fiscal capacity of heavily indebted countries like Italy, France, and Spain, and the market’s perception of their ability to handle increased spending.
De Guindos stressed the importance of having a government budget, especially during times of high uncertainty, to facilitate decision-making and measure implementation. He pointed out that political stability and effective parliamentary approval are crucial for economic resilience.
Regarding Europe’s strategic independence, he called for greater autonomy from the US, particularly in defense, technology, and payment systems, advocating for the digital euro as a means to enhance payment sovereignty.
On Spain’s economy, he noted improvements in competitiveness, a sound banking sector, and cyclical factors like immigration and EU funds supporting growth. However, he warned about challenges such as rising rental prices and increased demand for public services, which require policy adjustments.
De Guindos also addressed the legacy of Sareb, the ‘bad bank,’ emphasizing its role in restructuring credit institutions and its successful completion. He commented on the current political situation, the importance of a parliamentary budget, and the potential for Spain to have a representative on the ECB’s Executive Board in the future.
Finally, he shared plans for post-ECB activities, including academic and educational roles, and expressed that his experience could contribute to the public interest without returning to politics.
