De Guindos (BCE) emphasizes that the best way to recover growth is to reduce inflation

MADRID, 26 Sep. (EUROPA PRESS) -

The Vice President of the European Central Bank (ECB), Luis de Guindos, has stressed this Monday that the best way to recover economic growth is to moderate inflation, for which he has justified the rise in interest rates by the institution.

This was highlighted in his speech this Monday in the DiálogosAED cycle, where he explained that as the rise in prices persists, the signals from the markets become more blurred and less clear, so the allocation of assets is much more complicated.

The Governing Council of the European Central Bank (ECB) updated its quarterly macroeconomic projections at the beginning of the month, in which it reflects, without expressly mentioning it, that the Eurozone will fall into what is known as 'stagflation', that is, stagnation of the economy but with high price increases.

The forecasts have worsened to a greater extent for 2023: while in June the agency expected growth of 2.1%, the effect of energy prices on the purchasing power of citizens and the impact of supply problems on the economic activity has led them to reduce it to 0.9% for the whole of the Nineteen.

Faced with this situation, the Vice President of the ECB has stressed the need to focus the measures on those who have low incomes, who are the ones who are feeling the most the effect of inflation by dedicating practically 100% of the total to consumption.

Regarding Italy, which held its elections this Sunday, De Guindos has pointed out that the country's economy has done better than the European average in the last two years and that it has already recovered the level of income prior to the pandemic.

In addition, its banking sector is doing better than a few years ago, with a level of doubtful credit that stands at around 3%. The problem, for De Guindos, is that his public debt is around 150% of GDP, but he has highlighted that he has a "very good" net investment position.

On the other hand, De Guindos has avoided commenting on the tax presented by the Spanish Government to banks and has recalled that although the Congress of Deputies may request an opinion from the body, this would not be binding.

Thus, he has repeated that this rate should not hinder the granting of credit or tighten financing conditions, nor harm the solvency of the sector.

As for the Spanish economy, the ECB Vice President highlighted that it has two advantages: the banking sector is not in doubt, unlike in 2010, and the strength of its foreign sector. "I would ask that these two pillars, which are fundamental, be maintained," he pointed out.

When asked about the European funds, De Guindos explained that it is very important to spend time choosing the best projects, as this time it is transfers and not loans, although he does not know why the aid is being granted so slowly in Spain.