ECB’s Villeroy: Any Recession Would Be ‘Limited and Temporary, with a Sharp Rebound in 2024’

15 September 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Thursday said that if there were a recession at all, it would be shallow and followed quickly by a strong recovery.

In an interview with French daily La Croix, Villeroy, who heads Banque de France, said that European growth would suffer from the Russian war against Ukraine and the absence of Russian energy.

‘But we do not foresee a disaster scenario comparable to the post-Covid recession’, he said. ‘If a recession were to come, it would be limited and temporary, with a sharp rebound in 2024.’

Wages were increasing to an acceptable degree and with no evidence of a spiral, he said. Still, core inflation was high, and was above all what ‘central banks must not allow to slip and persist’, he said.

‘Persistently too high inflation would not only be a social poison for households, it would also be an economic poison, which would make the environment much more uncertain, and would therefore prevent investment and growth', he said. 'The later we react, the stronger we would have to act.’

The ECB was headed in the same direction as the US Federal Reserve, just ‘with a rhythm and a level that may be different’, he said. ‘And we are firmly committed to bringing inflation down to 2% in the next two to three years.’

As for French growth, it would resist a slowdown this year, decelerate significantly next year and then recover in 2024, he said.

‘In the field, our surveys show that business leaders are much more penalized by supply problems, due to recruitment and supply difficulties, than by a lack of demand and orders’, he said.