Luis de Guindos, vice-president of the European Central Bank, recognizes that the euro zone enters a recession.
Interview by Eric Albert (words collected by, (Frankfurt, Special Envoy))
Luis de Guindos, vice-president of the European Central Bank (ECB), former Spanish Minister of the Economy, recognizes that the euro zone enters a recession but insists: inflation is such that the monetary institution is obliged To continue to increase interest rates.
How would you describe the economic economic situation in the euro zone today? Are we in recession?
The indications for the fourth quarter suggest that we may be in negative territory, but in a little marked way, with an expected contraction of GDP of 0.2 %. The advanced indicators that we have are not good. According to our projections, the euro zone should thus enter a light recession in the last quarter of this year as well as in the first quarter of 2023, where GDP should contract by 0.1 %.
on this Base, why does the ECB harden its monetary policy? Thursday, December 15, you increased the rate of ease of deposit by 0.5 point, to 2 %, while Christine Lagarde, in her press conference, announced several new rate increases in 2023. Do you not risk to accentuate the recession?
Look at our inflation projections. We published our projections in September, then again in December. Between these two exercises, our growth forecasts have not changed much: they are a little better than expected for 2022, with an upward revision, from 3.1 % to 3.4 %, a little lower for 2023 , with downward revision, from 0.9 %to 0.5 %, and identical in 2024, to 1.9 %. The substantial changes, however, relate to inflation, which has been revised upwards quite significantly, from 5.5 % to 6.3 % for 2023 and from 2.3 % to 3.4 % for 2024.
Certainly, but inflation seems to have reached a peak. In the euro zone, it went from 10.6 % in October to 10.1 % in November. With the prices of raw materials that retreat, this trend should continue …
We think that in the next two or three months, inflation will remain around the current level, then, in the second quarter of next year, it will actually record a drop, to settle around 7 % In the middle of the year. But this remains clearly above our price for price stability, namely 2 % inflation in the medium term. We have no choice but to act.
but you act by stifling the little growth that remains …
Monetary policy works by braking demand, which slows growth, there is no other possibility. But if we were doing nothing, the situation would be worse, because inflation is one of the reasons for the current recession. It reduces household disposable income and particularly affects the most vulnerable people. By reducing inflation, we will contribute to growth.
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