Vice President of the European Central Bank (ECB), Luis de GuindosAt a seminar organized by Menéndez Pelayo International University this Thursday, he assured: We’re in the “final phase” of rate hikes.
Warning against runoff effects and inflation expectations, De Guindos said, “We are entering the final turning point,” and therefore he believes the rate decision will take place in mid-September. is it still “open”.
De Guindos stated that the increase in interest rates has already tightened the financing conditions, which in turn led to a decline in loan demand. The former Economy Minister recalled that monetary policy decisions are announced with a “delay” of between 12 and 24 months.
De Guindos underlined the negative effects of inflation and defined it as follows: “absolute evil for economic and social life” because of the effect it has createdabove all in the lower-income segments of the population, because they consume more and buy more products.
In this way, he defended the policy of increasing interest rates. “bitter medicine but necessary medicine” For the economy to recover and grow again. “The best contribution a central bank can make to the future of economic activity is undoubtedly to reduce inflation,” de Guindos summed up.
In line with the above, De Guindos also valued the ECB’s expansionary response during the pandemic, as liquidity support prevented a “collapse”. [del sistema] It was far superior.”
But when the economy rebounded and war broke out in Ukraine, the executive branch admitted that economists were wrong in believing that inflation would be “temporary”, leading to monetary tightening to stop it.
Economical situation
Former minister cites potential downside risks to growth “Embodied”As July, August and forward indicators “definitely” point to “deceleration” in the third and fourth quarters. De Guindos argued that at the moment the slowdown in the economy is more “apparent” than the slowdown in inflation.
The Spaniards considered Using “common sense” is “important” when it comes to resuming compliance plans and reducing debt through the containment of the public deficit. Therefore, it evaluated the previous 60% public debt target as unrealistic due to the difference in debt levels in different countries of the European Union, and therefore indicated that it favored the revision of the following implied targets. a “middle ground” to which “everyone must surrender”.
As for China, De Guindos argues that the impact of the instability of the Asian giant’s real estate sector on the European economy is not due to the “direct” exposure of European financial institutions to this sector, but mainly “indirectly” as a result of slow growth in the World economy.
On the other hand, De Guindos said that Spanish banks “in the coming weeks or months” Deposits will begin to be made and online savings with their European peers “how could it be otherwise”. The ECB vice-president explained that so far this has been due not to a lack of competition, but to “excess liquidity” that is already disappearing.
Public aid and the digital euro
De Guindos argues that the “strongest countries” and those with larger financial margins should invest in their own companies and Providing “competitive advantages” that other countries cannot afford due to the lack of healthier financial positions. The Spaniard advocated a return to the original spirit of public policy and the creation of a “competitive market” in Europe where “everyone has the same opportunities”.
Concerning the European Union’s Next Generation Funds, De Guindos noted that they contribute to “breaking a kind of taboo” as they are given as transfers to countries and not as loans.
De Guindos also referred to it to ensure that the digital euro would be a payment method, not an investment, and would be ‘useful to keep crypto assets and ‘stablecoins’ at bay. Similarly, countries where cash has a significant presence, such as Germany or Austria He reminded that cash money will not disappear due to the potential constitutional amendment to protect its circulation in Turkey.
The peculiarity of the ECB
De Guindos explained that although the ECB is responsible for the monetary policy and supervision of the euro area, it differs from other central banks due to the financial fragmentation caused by the existence of different sovereign nation states.
“It’s not always easy when you have 20 Member States Because you continue to have national interests and your differences from a national point of view continue.”
By contrast, De Guindos described the ECB’s management as “interesting” because each member has one vote in the Governing Council. De Guindos, who describes this system as “highly democratic” and designed to protect the “general interest”, cites for example that “the Spanish governor’s vote is the same as the Maltese governor’s vote.”
The Spaniards opposed this model at the Council of Europe, where votes were weighted based on factors such as population so that large countries could cast their votes. “Impose what their approach is from time to time”.