ECB’s de Guindos: Main Threat to EMU Financial Stability from War’s Macroeconomic Impact

25 May 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Wednesday said that the main threat to euro area financial stability stemmed from the macroeconomic ramifications of Russian military aggression

In the foreword to the ECB’s May 2022 Financial Stability Review, de Guindos said of Russia’s war against Ukraine that ‘[t]he invasion and the associated uncertainty have prompted some repricing in global financial markets, albeit with much less turmoil than seen in March 2020, and dampened the confidence of businesses and consumers that are only just emerging from the tight restrictions imposed during the coronavirus COVID-19 pandemic.’

‘Higher energy and commodity prices are pushing up inflation and slowing the economic recovery’, he said, while ‘[e]levated volatility has highlighted some liquidity risks, notably in some commodity derivatives markets.’

‘However, the main threat to euro area financial stability comes from the impact through macroeconomic channels’, he added. ‘This implies additional challenges for indebted businesses at a point in time when countries’ fiscal space is very limited and support may need to be more targeted than the broad fiscal policy response to the pandemic.’