Luis de Guindos, ECB Vice-President, discusses global economic transformation, euro area inflation, growth prospects, and financial stability risks amid geopolitical uncertainties.
Luis de Guindos, Vice-President of the European Central Bank (ECB), delivered a speech at the 16th Spain Investors Day, addressing the impact of global economic changes on the euro area.
The global economy faces significant transformation and uncertainty due to US policy shifts, erosion of multilateral systems, trade disruptions, and geopolitical risks. These factors affect euro area economic activity and financial stability by delaying investments, reducing exports, and increasing precautionary savings among households.
Euro area inflation stood at 2.0% in December, with energy prices lower than a year ago and slight declines in core inflation. Wage growth remains strong but is expected to ease before stabilizing towards 2026. Economic activity grew by 0.3% in Q3 2025, driven mainly by consumption and investment, with a resilient labor market and low unemployment.
Growth projections have been revised upward, expecting above 1% in 2025 and 1.4% in subsequent years, mainly supported by domestic demand, business investment, and government spending. Household savings remain high due to fears of future tax increases and income uncertainty.
External shocks and geopolitical tensions pose risks to growth and inflation. Increased trade competition from China, global supply chain disruptions, and geopolitical tensions could lead to volatile asset markets, tighter lending conditions, and higher risk premia. Safe-haven assets like gold have reached record prices, indicating policy uncertainty.
Financial stability risks include concentrated asset valuations, vulnerabilities in non-bank financial sectors, and interlinkages between banks and non-banks. Sovereign debt challenges and fiscal policy uncertainties could also impact markets, especially in the US and some euro area countries.
To address these risks, euro area banks should maintain strong solvency and liquidity, and regulatory frameworks are being simplified. Greater cooperation and deeper integration within Europe are essential to enhance resilience, unlock the Single Market’s potential, and complete the banking union. Strengthening Europe’s growth prospects requires more, not less, integration amid a changing global order.
