Risk of European recession 'very low': ECB's De Guindos
Reuters
Published Nov 14, 2019 08:27AM ET
Risk of European recession 'very low': ECB's De Guindos
By Elizabeth Howcroft and Marc Jones
LONDON (Reuters) - ECB Vice President Luis De Guindos said on Thursday that Europe faced only a "very low" risk of recession, but he called on all euro zone governments - not just those with fiscal surpluses - to help revive the bloc's economy.
De Guindos spoke said after data showed the region's largest economy, Germany, narrowly avoided edging into recession in the third quarter.
Europe's growth remained "below potential", he said, adding that the ECB needed "to pay close attention" to the situation.
He said authorities needed to confront the risk of "Japanification" - a prolonged period of low growth and low inflation - if measures were not taken to stimulate the economy.
But he also said the term was an over-simplification due to the differences between Japan and Europe, including Europe not having a credit bubble and having more fiscal room to maneuver than Japan had in the past.
In September, the ECB pushed euro zone interest rates further into negative territory and said it was restarting its mass bond-buying program having only wound it down at the end of last year.
De Guindos echoed recent calls for governments to step up their support efforts, but also suggested that an "aggregate" fiscal stance was required.
"Now our party line is more or less that countries that have space should do more and countries that do not have fiscal space should continue reducing the public deficit," he said.
"I think that position, the logical one, in consideration of the set of rules that we have now, is not enough," suggesting the need for a more comprehensive, bloc-wide plan.
De Guindos said that in his opinion the ECB and other central banks around the world will need to expand their "toolkit" in the sense of doing more than conventional monetary policy usually entails.
The ECB is currently working on a review of its policy framework.
PROFITABILITY PROBLEMS
De Guindos also said that low bank profitability was currently the main financial stability risk in the euro zone.
He acknowledged that it was a negative side-effect of the ECB's sub-zero interest rates but stressed that "structural" problems like overcapacity in the banking system were more to blame than ECB policy.
He welcomed the German finance minister's recent support for a Europe-wide banking union.
Get The News You Want
He also rejected the idea that monetary policy alone could be used to tackle lackluster growth. "Central bankers, we are not almighty. We do not have the philosopher's stone. We cannot address all the problems of the world economy."
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.