ECB’s de Guindos: ‘Growth Is the Main Risk We Are Facing Now’

20 November 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Vice President Luis de Guindos said on Wednesday that the central bank was not ‘almighty’ in tackling weak growth, which was the greatest risk for the moment.

In a briefing with journalists about the Financial Stability Review published on Tuesday, de Guindos said, ‘The low-growth scenario we are having now, the very low potential growth, has to do much more with structural policy.’

De Guindos cited the lack of competitiveness and productivity as structural elements leading to sluggish growth in the Eurozone.

‘Economic growth remains fragile, while concerns about global trade outlook add to geopolitical and policy uncertainty’, said the Financial Stability Review press release.

Despite reiterating his unwillingness to detail which policies he expected US President-elect Donald Trump to apply, de Guindos said the ECB ‘had some indication’.

If Trump were to raise tariffs against other countries, one should expect a retaliatory response from these, he said.

This would create a ‘vicious circle that could lead to a trade war that would be detrimental for growth’, he added.

Trump’s trade threats were one of the main elements of concern for the ECB at the moment, according to de Guindos.

In terms of the macroeconomic outlook, he said the ECB had ‘good news’ with respect to inflation, while economic growth was still ‘quite fragile’.

‘Growth is the main risk that we are facing now’, he observed. ‘This has to be complemented with geopolitical uncertainty’.

If trade tensions were to increase due to certain policies, this would have a clear impact on growth and could worsen the economic outlook, he said.

‘Policy uncertainty, weak fiscal fundamentals in some countries and sluggish potential growth raise concerns about sovereign debt sustainability’, said the press release.