Of Stelios Kandias
The phrase of the then President of the European Central Bank Mario Draghi 10 years ago “we will do what is necessary” was used on Friday by the Governor of the Bank of Greece Giannis Stournaras, this time referring to the strong inflationary pressures facing Europe.
“At this stage, there is no risk of a recession in Europe,” he said.
Before the pandemic we had a problem with low inflation and joined measures such as QE (quantitative easing). The pandemic and the war in Ukraine caused side shocks to supplies we could not have foreseen. We will not let inflation get out of control and spread in the labor market, we will do whatever is necessary so that temporary inflation does not become a structural problem, said Mr. Stournaras.
Some friends predicted the end of the euro, it is still here, he stressed.
We had imbalances in the first period of the euro, with real estate bubbles and fiscal imbalances that led to the crisis of 2008-2009. But Europe created new institutions such as the ESM, and Greece was the “midwife of history”.
“Since 2015, we have had smoother developments, but the pandemic and the war are causing new challenges and opportunities to improve the architecture of the euro by formulating common policies as in the pandemic that was the catalyst,” Stournaras added.
Under certain conditions, the euro can become the dominant currency in the world foreign exchange reserves and in international payments, said Giannis Stournaras.
In order to have a dominant currency, we need a liberal economy with a large market and liquidity. The euro can cause the dollar, if we create a permanent common bond, if we move towards greater economic integration with fiscal union. This is not a request of the south, he clarified, but it will make the euro more resilient. This can not be done now, there are many political restrictions, but it must be our vision, insisted Giannis Stournaras.
He also commented that cryptocurrencies are a dangerous development, we bankers do not like them, but if we talk about digital currencies they can help in transactions. For now the dollar will continue to dominate predicted.
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