Luis de Guindos, Vice President of the European Central Bank, warned about the growing impacts of trade tensions on financial markets in the euro area, noting that they could exacerbate market volatility and reinforce uncertainty. This came in his statements regarding financial stability, where he confirmed that ongoing trade tensions between major economic powers could lead to sudden shifts in asset prices and negatively affect global economic growth.
De Guindos pointed out that financial markets have experienced significant volatility in recent months due to rising geopolitical risks, increased trade disputes, and changes in monetary policies. He emphasized that the potential for trade conflicts to escalate into a full-blown trade war could adversely impact economic stability and increase inflationary pressures.
Despite these challenges, the ECB member confirmed that financial stability in the euro area remains strong, with banks continuing to support the financial system and the macroeconomy. However, he warned that markets remain vulnerable to sharp fluctuations that may arise from negative surprises in global economic conditions, especially in light of strong market concentrations across geographical and sectoral levels.
He added that these risks could undermine investor confidence and lead to unexpected movements in capital flows and asset prices, which could pose significant challenges for economic policymakers in the euro area. He assured that the European Central Bank will continue to closely monitor economic developments and will be ready to take necessary actions to protect the stability of the financial system if needed.
