OR European Central Bank should continue to relax her policy at a steady pace until her basic interest rate It reaches 2%, as growth risks are increasing and inflationary pressures are weakened, the Bank of Greece Governor said in an interview. Giannis Stournaras.

“I don’t think our next meeting is the right time to discuss interest rate cuts,” Mr Stournaras from Athens told Politico. “It’s still too early.”

His comments are clearly disagreeing with Ms Isabel Schnabel, also a member of the ECB’s Board of Directors, who last week said that the ECB’s Board of Directors should start discussing whether to stop or end the reductions. Increes at its upcoming meeting on March 6th. Since last June, the ECB has reduced five times its key policy interest rate, the interest rate on facilitating acceptance of deposits, from historically high 4% to 2.75% today. According to Ms Schnabel, who is considered the “hawk” with the most influence among the members of the ECB’s board of directors, it is no longer found that interest rates still affect economic activity.

Mr. Stournaras clearly expresses the opposite view.

“We are still on clearly restrictive territory,” he said, adding that this is also the official position of the ECB. This position is also based on expectations that are widely prevalent that growth will remain weak and inflation will return to the desired goal this year. “If this situation continues, we should definitely reduce interest rates,” Mr Stournaras argued.

Nevertheless, Mr Stournaras – usually a strong supporter of views that classify him in the “pigeons” of monetary policy – avoided agreeing with the most recent prediction resulting from Bloomberg research, according to which a slim majority of respondent analysts expects interest rates reduction in March 2026, in addition to reductions by 25 points Base each time in the three next meetings.

“Whatever we say now about 2026, it will be very premature,” Mr Stournaras said, but – continued – “based on today’s available data, I expect that by autumn 2025 the interest rates will reach 2%. , which will probably be their final level. “

By March 6, the ECB will probably have no clear picture of how the Eurozone economy will affect the new US government policies, especially with regard to duties, Mr Stournaras said. And that is why it does not expect drastic revisions of ECB forecasts on growth and inflation.

However, he warned that “we see reinforced opposite winds coming to us on the other side of the Atlantic, who exacerbate uncertainty” and risks risks to the prospects for the growth of the eurozone.

Transatlantic challenges

Mr Stournara’s interview at Politico coincided with the week during which a series of announcements by President Donald Trump and other US senior officials caused a riot in Europe, calling for the future of European democratic institutions, with Washington in Washing. Restoration of its relations with Russia at the expense of Ukraine and the rest Our Epirus.

At the lunch he quoted us at the Bank of Greece Guesthouse overlooking the Acropolis – the symbol of ancient Hellenic Republic and Western Culture – Mr. Stournaras recognized the magnitude of the challenges created by the abrupt conversion of US policy, but at the same time attempting to It also finds positive aspects.

As he argued, if Trump manages to negotiate a peace deal in Ukraine, the lowest prices of food and energy will quickly lead to inflation reduction and will ultimately boost growth prospects. “Regardless of the details of the peace agreement – and let’s put aside politics – Peace will surely positively affect the economy,” Mr Stournaras said.

He also emphasized that the new turn of the events “is an opportunity for Europe to develop autonomous action and voice”, as well as an awakening that needs to be used to enhance investment and competitiveness.

But Washington’s sudden decision to distance himself from his democratic allies in Europe could have indirect consequences for the ECB if she forced Europe to re -think how she pays for her security.

Those who have the opportunity to increase their costs at national level should do so, Mr Stournaras said. But as many countries have already exhausted their lending capabilities, the EU can be forced again, as it did during the pandemic, to borrow for its own account to rebuild its defensive abilities, which have atrophy after the aftermath. End of Cold War.

“We need to spend more, but also more prudently,” Mr Stournaras stressed, adding that this means strengthening Europe’s defense industry, as well as a joint policy on the supply of defense equipment. Such initiatives would be compatible with the vision described last year by the report of former ECB President Mario Draghi, which briefly examines the challenges for the EU, although – as Mr Stournaras admitted – they should bend the vigorous resistance of the projected resistance. Larger EU member states.

“Are we ready to discuss these issues and reach an agreement? And more specifically, are Germany and France willing, who usually begin such discussions, to agree on such a common agenda? “

Who will pay?

As with all the challenges facing the EU, the question is: Who will pay? Mr Stournaras acknowledged that the ECB is likely to be pressured to support EU’s broader policy goals. Indeed, this is an obligation of the central bank under the EU Treaty, since the achievement of the primary of the purpose, which is to maintain inflation at low levels.

As Mr Stournaras said, the best contribution the ECB can have is to ensure prices stability and the creation of an environment favorable to sustainable growth. However, it left open the possibility of providing more targeted support for the defense industry if EU leaders set a significant increase in spending.

The ECB has leveled its capabilities within its secondary purpose to significantly expand its contribution to tackling climate change, orientation of corporate bond markets in favor of greener businesses and investment and imposing penalties on banks, which do not They adequately recognize the climate risks that can affect them, e.g. because of extreme weather events.

“For the green transition, we have a mandate, as it is a proclaimed EU policy target. Do we have a common policy goal to strengthen defense spending in the European Union? We don’t know this yet, “said Mr. Stournaras.

“If the increase in defense spending is set as a common EU goal, then we will be able to discuss how the ECB can help to achieve it,” he said, stressing that this is his personal opinion. “According to the Treaty, we must support EU policies, they are part of our mission.”

As he said in a recent speech in Athens, addressing EU countries: “We cannot progress in an environment where security is fragile or undermined. Strengthening EU political and military readiness must be a priority. “