European economy in “very difficult situation”, says ECB vice president

“The high inflation rates we are seeing across Europe coincide with an economic slowdown and low growth”, he told the Spanish Confederation of Associations of Young Entrepreneurs (CEAJE) in a December 16 interview published Tuesday on the ECB website. In addition, he stressed the importance of both individuals and companies being prudent and focusing on the long term.

In his comments, Guindos reiterated the messages made in the December 15 interest rate decision, including the new economic projections released that day. Asked how much borrowing costs will rise, he repeated the ECB’s mantra that this will be decided “meeting by meeting and depending on the data that comes in.”

Guindos also stressed the view that the eurozone is going through a “shallow and short-lived recession” before the economy returns to growth in the second quarter.

“This situation is undoubtedly a challenge for companies and their sustainability.”said the vice president. “With a recession on the horizon, the current heightened uncertainty makes it even more difficult for companies and entrepreneurs to allocate their capital. So, in this context, it is very important to be prudent”.

Interest rates will rise further

The vice president of the ECB said that the monetary entity will decide to raise interest rates further according to economic data.

In the interview with CEAJE, published today, De Guindos stated that they will decide “meeting to meeting and according to the data”, given the great current uncertainty.

“As we have announced this December, there will be more increases, those necessary to redirect inflation close to our 2% target”, according to the vice president of the ECB.

Likewise, De Guindos predicted “a brief and shallow recession in the eurozone at the end of the year”.

“However, starting in the second quarter of 2023, we expect the activity to recover positive growth rates and that these will be maintained in 2024 and 2025.″, he added.

For this reason, de Guindos believes that: “At a time of uncertainty and economic slowdown like the one we are experiencing, it is very important, both for individuals and companies, to be cautious and prudent with an eye on the long term.”.

His advice to all young entrepreneurs is to “be persevering, always with caution, despite the difficulties”.

In addition, de Guindos encourages all young people “to train, learn languages ​​and become familiar with new technologies to be prepared for the future and be able to better handle situations of uncertainty or instability”.

With information from Bloomberg and EFE