(Ticker) – “The period of negative interest rates is overat least in the medium term. We are going through a period of high uncertainty“. He stated this Louis de GuindosVice-President of the European Central Bank (ECB), in an interview with Business Post.
Still on the monetary policy front, he said: “We raised rates by 50 basis points in March and we are open to the future. We depend on the data. Now there is this further element of uncertainty deriving from the problems of the financial sector in the United States and Switzerland. And we will take a meeting-by-meeting approach. We do not pre-commit to any action.”
de Guindos wanted to underline how the banking sector in Europe is “resilient” and that “in the case of Credit Suisse and US banks, there were specific and idiosyncratic factors”. Furthermore, he said that the ECB’s main concern in terms of financial stability is the situation of non-banks. “I non-bank entities they have grown as a share of the financial system in Europe and have taken on a lot of risk during times of very low interest rates. These are risks in terms of liquidity, duration, credit and leverage. Therefore, when monetary policy changes, these potential vulnerabilities can come to light.”
The Spanish economist said that the current situation is very different from the one the Old Continent found itself facing in 2008/09: “First of all, the banks have much better capital and liquidity positions, well above the minimum requirements, their overall situation is more solid, also due to more stringent regulation. Secondly, looking at the macroeconomic situation, there are no problems with the competitiveness of European economies. For example, the balance of payments in Spain, Greece, Ireland or Portugal is in a much better position.”
“Finally – he explained – the economic policy approach is different compared to 2010, 2011 and 2012. We had four years of more flexible fiscal rules. This was the correct response to the crisis during the pandemic. It was sort of all that which serves in fiscal policy, while monetary policy has also been very supportive we have other difficulties, but these can be tackled more easily than during the great financial crisis“.