Guindos (ECB) fears a recovery at two speeds in Europe

The pandemic will leave Europe with higher levels of public and private debt, but also with lower rate prospects MADRID, Jun 30 (EUROPA PRESS) – The risk of a two-speed recovery in Europe currently represents the main concern of the vice president of the European Central Bank (ECB), Luis de Guindos, who has stressed the importance of mitigating this fragmentation through a pan-European fiscal response such as that proposed by the European Commission. “My main concern now is a recovery at two speeds in Europe,” Guindos acknowledged during his speech at a telematic seminar organized by the National Association for Business Economics (NABE), pointing out the different fiscal positions of the countries in the euro area. and their different degrees of confinement during the pandemic as fundamental reasons for these differences. In this sense, the former Spanish minister has defended that the German response to the crisis “has been correct”, since the largest economy in the euro enjoyed a wide fiscal margin. “My concern is that not all European countries are in a similar position to Germany and that is why the (European) recovery fund is so important.” For this reason, Guindos has defended the importance of potential aid through this instrument taking the form of subsidies instead of loans, which would be very important for countries with a more limited fiscal margin. “I think that the response from the European authorities, not only monetary, but also in the fiscal area, has been correct (…) It is not just the size or the components of that fund, but the message that is being sent. For the first time, a European common debt will be issued, “he stressed, stressing the importance that” the leaders of different countries demonstrate that they are open to addressing this extraordinary situation. ” “The political message is more important than the characteristics of the recovery fund,” said the ECB vice president. DOUBLE LEGACY OF THE CRISIS. On the other hand, the central banker has indicated that the necessary response to face the crisis will suppose a double legacy of higher levels of public debt, as well as leverage of companies, although he stressed that, at the same time, the perspective on the evolution of interest rates will be even more moderate than before the pandemic. “The perspective on interest rates will be even more moderate than before the pandemic and this will be helpful,” Guindos said when asked about the future sustainability of the debt. Likewise, the former Spanish minister has indicated that the objective of monetary and fiscal policy should be to keep as many companies as possible operating, for which liquidity and public guarantees have been provided to European companies, in addition to putting into practice different temporary protection schemes against unemployment. When questioned about the possibility of creating a ‘bad bank’, Guindos has reiterated that it is a powerful instrument to clean up the balance of the entities, as demonstrated during his mandate as Minister of Economy in Spain and also happened in Ireland Although he has assured that the Governing Council of the ECB has not discussed anything in this regard. “I think it is premature,” he said. In this sense, the vice president of the ECB has stressed that more than this issue it is a priority to complete the banking union in Europe for what he considers key to agree and implement a common deposit guarantee fund. “To have a single banking market in Europe it is key to implement this common deposit guarantee fund,” he added.