By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras said in a Politico interview published Thursday that inflation was set to converge to the 2% target over the medium term and that the euro area economy “remains in a good place.”
Stournaras, who heads the Bank of Greece, said risks to growth and inflation looked broadly two-sided, but judged there was a “slightly higher” chance that the next rate move would be down rather than up.
He played down the prospect of near-term surprises from Frankfurt, saying, “Unless the sky falls on our head, don’t expect sexy news from Frankfurt this year.”
Beyond the rate outlook, Stournaras urged European governments to move toward common debt issuance, arguing that joint borrowing would strengthen the bloc’s ability to fund shared priorities and compete globally.
The German government was his toughest audience, he said, adding, “I do worry” about resistance from Berlin, “But I’d like to convince them.”
Stournaras argued that investors wanted a larger supply of euro-denominated safe assets and said common issuance should be limited to “well-defined common European purposes,” naming “[d]efense, green transition, innovation.”
He said eurobonds “cannot become a substitute for sound national fiscal frameworks,” but argued that additional rules or new oversight bodies were unnecessary, pointing instead to the design of the post-pandemic recovery fund.