De Guindos calls for taxation to help reduce the effect of inflation on vulnerable groups

Anticipates more rate hikes and rejects a recession scenario in the EU, although there will be a "slowdown"

ARROYO DE LA ENCOMIENDA (VALLADOLID), Sep. 12 (EUROPA PRESS) -

The Vice President of the European Central Bank (ECB), Luis de Guindos, has recognized that the uncertainty of the economy in the EU as a whole is "enormous", a situation in which he considers that it would be a mistake to apply an expansionary fiscal policy, for He has asked that taxation help reduce the effect of inflation on the most vulnerable groups.

Guindos has advanced, also that there will be more rate hikes in the euro zone after already reaching 1.25% after the last increase of 0.75%.

De Guindos participated this Monday in the forum 'Meetings in Castilla y León' organized by the newspaper El Norte de Castilla and CajaMar, where he analyzed the current economic situation in the euro zone and insisted on the forecasts and actions adopted by the Bank Central Europe, from where one does not work in a scenario of economic recession, although one of "slowdown".

The vice president of the ECB has insisted that the EU is experiencing a situation of "uncertainty" and has advanced that the central scenario in which the entity works does not speak of a recession. "We are talking about very low growth in the first quarter (of 2023) but without a recession," De Guindos has defended, who has not hidden that a very negative "alternative" scenario has also been developed that would start with a "total cut" of supplies from Russia and that would lead to a negative growth rate of -0.9%.

Despite this reflection, De Guindos has outlined that the central scenario in which the EU works is a growth of 0.9% by 2023, a rate that would be "somewhat below" 2% in 2024.

For the vice president of the ECB, the situation will be one of slowdown in the euro zone, however he has avoided being catastrophic and has assured that the European economy will grow again in the coming years.

In his speech before this Forum, the Vice President of the BCE insisted that the current situation makes it necessary not to make mistakes and, in his opinion, one of them would be to apply an "expansive" fiscal policy, for which he has defended that the tax area seek to "relieve" families and companies from the increase in inflation that, in many cases, forces them to endure a "very difficult" situation.

For De Guindos, the current fiscal policy should be more selective and temporary aimed at reducing inflation in vulnerable groups of society. "Inflation is not felt by everyone in the same way, an expansive fiscal policy has no margin and would conflict with monetary policy", she has indicated.

The second of the "errors" pointed out by De Guindos would be to promote the so-called "second round effects", which leads to "spirals" of salary and price increases that would mean a "loss of competitiveness".

In this sense, the vice-president of the ECB has indicated that the effects of the measures promoted by the body with the rise in rates will have their effects in a period of 18 or 24 months, for which he has advanced that there will be new rises in rates until that inflation is around 2%.

Regarding how much these guys could raise, De Guindos has been cautious and has explained that it is something that must be evaluated "game by game".

Lastly, the vice-president of the ECB has warned the banking sector of the problems that adopting "short-term" measures can cause and has recommended that they look to the future in the face of a "complex" moment for the EU economy in which there will be lower growth, a "high and persistent" inflation and the uncertainty of the war and its effects on the price of energy.