The ECB is “prepared to intervene”, if there is a risk to the financial stability of the euro area
The European Central Bank is “prepared to intervene”, if there is a risk to the financial stability of the euro area, Christine Lagarde said on Friday, after a agitated week in the financial markets in the context of the commercial war triggered by Donald Trump.
The monetary institution “Follow the situation closely and is always ready to intervene“and use”the tools available to“said Christine Lagarde in Warsaw, on an informal meeting of the Euro -area finance ministers, without giving more details.
The statements of Christine Lagarde come less than a week from the next monetary policy meeting in the ECB, while in the background the stock markets are decreasing and the dollar continues to depreciate to the euro. The reason, the announcement of Beijing on a new increase in customs tariffs for US products, a proof of escalation of tensions between the first two savings of the world.
The additional commercial tensions could lead to powerful turbulence on bond, shares and foreign markets, with the risk of destabilizing the financial system in the euro area.
“For now, we do not see any sign of liquidity problems on the market“, Claudia Buch, the president of the Bank Supervision of the ECB, said in an interview with Bloomberg on Friday.
A commercial war would brake exports and economic growth, which would oblige the ECB to adjust their monetary policy to support the economy. The volatility on the market would also diminish the efficiency of the ECB's monetary policy decisions, if for example, the reduced interest was not correctly repeated on the loans granted to companies or households.
In the first 20 years since its establishment, the ECB had to resort to an entire arsenal of measures to calm more crises.
Between 2010 and 2012, several countries in the euro area (Greece, Portugal, Spain, Italy) faced very high costs on loans, which threatens the stability of the euro area. In 2012, the then president of the ECB, the Italian Mario Draghi, pronounced the famous phrase '' Whatever It Takes '' (whatever will be – no) to save the euro through potentially unlimited acquisitions, to which in the end he did not resort.
After the Covid-19 pandemic outbreak, the institution based in Frankfurt launched an emergency program called PEPP, the acronym from Emergency Purchase Program, consisting of debts worth 1,850 billion euros, to support states and companies.
Subsequently, in the context of rapid increase in interest and tensions on debt, but also a record inflation, related to the Russian invasion of Ukraine, the ECB has created a new tool to intervene if the interest differences between the member countries of the euro area would become too large.
