ECB’s Sleijpen: Political Uncertainty Could Hinder the Effectiveness of Monetary Policy

11 November 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Olaf Sleijpen warned on Tuesday that widening fiscal gaps among euro area countries and rising political uncertainty could weaken the transmission of monetary policy.

In a speech at the Annual Research Conference of De Nederlandsche Bank, which he heads, Sleijpen said that while fiscal differences across the Eurozone are not inherently problematic, “extreme disparities can weaken how monetary policy works across the EMU,” creating rapid spillovers between countries.

He said that supply shocks were likely to occur more frequently than in the past, making a stronger and more cohesive euro area essential in addressing these challenges.

“On top of that, we are also facing increased political uncertainty,” he said. “This could threaten financial stability and hinder the effectiveness of monetary policy.”

Although the ECB had instruments to reduce market fragmentation and support policy transmission, Sleijpen stressed that the institution must remain alert. “Vigilance remains crucial,” he said.

Governments are under increasing pressure to raise expenditures, which could support growth and strengthen resilience to future shocks, he said. He pointed out that this may push the neutral rate higher, giving central banks greater policy flexibility.

“But in the short term, such spending can also fuel inflation and increase deficits, pushing public debt higher,” he said.