De Guindos (BCE) rejects "forward competition" in wages to avoid further monetary tightening

MADRID, 21 Abr.

De Guindos (BCE) rejects "forward competition" in wages to avoid further monetary tightening


Luis de Guindos, vice president of the European Central Bank (ECB), has warned against trying to pursue "forward competition" in wages, prices or margins because more restrictive monetary policies would have to be applied than initially planned, he stated in the presentation this Friday of the special issue of the Economists magazine "Spain 2022. A Balance".

"We have to accept that there has been an impoverishment as a consequence of what happened with the evolution of energy prices," he stated.

De Guindos has ensured that fiscal policy and aid for the energy crisis within the EU contained inflation to one point. In addition, he also took the opportunity to recall that the European banking system is sound, and that monetary policy will continue to be geared towards reducing inflation in order to maintain the confidence and credibility of the ECB.

"For us, the worst thing that can happen to us is that [...] both general and subjacent inflation are more sticky," he said to highlight that "concern about inflation is going to move from energy prices, necks bottles and supply restrictions, towards how governments are withdrawing the fiscal support measures that occurred at the beginning of the energy 'shock' and the evolution of wages and possible second-round effects".

In line with what was already stated this morning about those who speculate on interest rates, he warned that "nobody should be believed who says what the terminal rate will be". "The markets are also wrong, what happens is that they react quickly", she has exemplified.

The vice president of the ECB has called for "completing" the banking union, implementing the capital markets union and a single deposit guarantee fund for the EU.

De Guindos has maintained that 2022 was "a good year" from an economic point of view for the euro zone, but that "it went from more to less, with the second part of the year being practically zero". However, he has affirmed that it has had a similar evolution to that of the rest of the world economy, and has pointed to the war in Ukraine as a paradigm shift.

"There are many economists who have not been educated in a context of high inflation", in reference to the rise in prices experienced after the 'post-covid' economic recovery and exacerbated by the Russian invasion. Although, the employment had "a good behavior".

Regarding the interest rate hikes, De Guindos stressed that they implied "a very clear tightening" of financing conditions and that these crystallized in a "very intense" drop in the demand for credit by companies and families.

"The concatenation of 'shocks' that we have suffered in the last three years, since the pandemic, is practically without precedent," De Guindos summarized.