Eurozone economic recovery continues to face headwinds but risks are low

Eurozone economic recovery continues to face headwinds but risks are low

EUROZONE economic recovery continues to face headwinds but risks are currently low, according to the Spanish Vice President of the European Central Bank (ECB).

Luis de Guindos said factors including the ongoing trade war between the US, China and EU, difficulties in emerging markets and Brexit uncertainty are dampening eurozone growth.

The ECB should loosen the money supply to buoy growth and ensure inflation remains close to its targeted rate of just below 2 per cent, the vice president added.

Policymakers should ensure that making money more readily available does not have unwanted side effects and create further risks, he said.

De Guidos said it would be important for financial firms and other companies to strengthen their balance sheets to guard against shocks to the economic system.

“Fortunately, banks have done exactly that in the last decade,” de Guidos said.

The vice president said there had been advances in regulations since the last recession. Rules need to be introduced to cover non-banking financial entities such as insurers and investment funds, he added.

De Guidos’ comments come as concerns continue over growth in the eurozone overall, in part due to Italy’s chronically low growth since the debt crisis and the fallout from Brexit.

The ECB decided to revise its forecasts for eurozone economic output growth (Gross Domestic Product, GDP) this year from 1.7 per cent to 1.1 per cent.

Spain continues to buck the eurozone trend, with the country’s GDP expected to grow by 2.2 per cent this year, according to government forecasts.

Spanish GDP was around €1.2 trillion last year, according to National Institute of Statistics (INE) data.