Iran, De Guindos: “We do not expect a recession; we are ready to raise interest rates if necessary”

Brussels – “We do not expect” a risk of recession. “Even in the most pessimistic scenarios, we continue to see positive growth.” The Vice President of the European Central Bank, Luis de Guindos, dismisses pessimism and talk of crisis. The war in Iran certainly poses risks, but nothing is catastrophic, he said in an interview with the Spanish newspaper El Mundo, published on the ECB’s website. Of course, de Guindos admits, within the Governing Council, “we concluded that [the war in Iran] will have a strong impact on both growth and inflation,” with growth revised down and inflation up, unsurprisingly. But ruling out further recessions helps to reassure markets and investors. 

It is precisely the reassuring tone of the ECB Vice President’s statements that stands out at a time of widespread concern and alarm, amid pessimistic messages from many quarters. The Commission has issued a warning regarding stagflation risks, with growth stalling and prices rising, while European Council President Antonio Costa has highlighted the risks to prosperity of the EU, encompassing both member states with and without the single currency. De Guindos’s words therefore convey the sense of a situation that is certainly delicate, but by no means catastrophic.

 “Needless to say, the longer and more widespread the conflict, the greater its impact will be,” the Eurotower’s deputy governor, whose term expires at the end of May, added. He therefore admits what many analysts are already beginning to regard as likely should the situation take a turn for the worse – something the Italian government would prefer to avoid: further interest rate increases. “We are ready to respond as necessary,” he stated in response to a very specific question. This is a possibility, not a certainty. The ECB, as already stated by President Christine Lagarde on more than one occasion, will make its decisions based on the data and indicators available.