European Central Bank (ECB) Vice President Luis de Guindos highlighted fresh warning signs this Wednesday about the Eurozone’s trajectory. The region appears to be sliding toward a technical recession in the latter part of 2024, a scenario that would follow a period of slower activity and weaker momentum. De Guindos emphasized that the latest data reinforce the view that the economy could slip into a sustained contraction in the final quarter of the year, making the possibility of a technical recession increasingly plausible in the eyes of policymakers and market observers alike.
During a speech at the fourteenth Spanish Investors’ Day forum in Madrid, the former Minister of Economy of Spain described the most recent growth figures as discouraging and underscored weak prospects for the near term. He noted that the trajectory remains fragile, with headwinds from higher financing costs and soft demand weighing on the region’s expansion. The remarks come as official data show the third quarter’s activity cooled, prompting fresh caution about the pace of recovery and the ongoing need to monitor risks to the outlook.
De Guindos pointed to a sequence of indicators that suggest a more subdued environment ahead. He stressed that while euro area indicators have yet to register a harsh downturn, the groundwork for a slower pace of expansion persists. In his view, the combination of subdued demand, tighter financial conditions, and ongoing structural adjustments presents a real challenge for sustaining growth in the medium term.
On the banking front, the sector remains comparatively robust. Banks reported comfortable capitalization levels and solid profitability, reinforcing confidence in their ability to absorb potential shocks. De Guindos insisted that the current state of the financial system is conducive to withstanding adverse events and continuing to support lending to the real economy, even amid heightened uncertainty.
Nevertheless, the central bank official cautioned that the outlook carries notable downside risks. He argued that limited demand, elevated financing costs, and persistent geopolitical and energy-related pressures could complicate the path to a more durable expansion. These factors, he added, raise concerns about long-term sustainability and the capacity of the economy to regain momentum without careful policy calibration and structural reforms that enhance productivity and competitiveness.