Stournaras says eurozone recession concerns ‘real and justified’

Concerns that the eurozone could slip into recession if the struggle successful the Middle East continued are “real and justified” and talks to extremity the Iran war will beryllium cardinal for the ECB monetary policy, Bank of Greece politician Yannis Stournaras said.

Stournaras, who is besides a subordinate of the European Central Bank’s Governing Council, said successful an interrogation published connected Sunday successful Cyprus’ Phileleftheros paper that while the eurozone system was resilient, its momentum has weakened.

“Concerns astir the anticipation of a recession successful the eurozone are existent and justified, fixed the caller antagonistic supply-side disruption caused by the struggle successful the Middle East,” Stournaras said. “Rising vigor prices and expanding uncertainty straight impact maturation and inflation, fixed the eurozone’s precocious vigor dependence,” helium said.

“In opposition to 2022, the emergence successful ostentation is occurring successful an situation of already weaker growth, tighter fiscal conditions and reduced fiscal space, which limits argumentation space and makes economies much vulnerable,” Stournaras said.

So acold there has been nary important spillover effect from higher vigor prices connected inflation, but harm to vigor infrastructure could bring inflationary pressures implicit the mean term and uncertainty could wounded concern and growth.

“Our effect will beryllium connected the intensity, duration and transmission channels of the shock. If it turns retired to beryllium transitory and without important second-round effects, nary accommodation of monetary argumentation will beryllium required,” helium said.

A large, but temporary overshoot of the ECB’s target mightiness necessitate a “measured adjustment” to bounds the second-round inflationary effects.

“If it leads to a ample and persistent deviation of ostentation from the target, then the effect should beryllium robust,” helium was quoted arsenic saying. [Reuters]