The economy in difficulties in Europe has worried economists, and the senior European politician of the Central Mário Centeno Bank, echoes that view.
“I am very worried about the European economy,” said Centeno on Friday, who is also governor of the Bank of Portugal, “CNBC Europe” Squawk Box “.
On Thursday, the ECB reviewed its gross expectations of the internal product for the euro area at a growth of 0.9% in 2025, below an expansion of 1.1% previously previously projected. The seasonally adjusted GDP of the euro zone recently obtained an increase of 0.1% in the fourth quarter.
Centeno linked the review of the growth perspectives downward with the reduction of exports and investments, echoing the ECB statement.
“I think that special investment is quite subjected in Europe. It will take four years to return to the investment level 2023 in the private sector, six years in terms of housing investment [and we will be] Returning to 2022 levels only in 2028, “he explained.
“These are numbers that ask some questions about recovery in Europe,” Centeno added.
Concerns about the slow economy of Europe have accelerated in recent months, after repeated threats of tariffs of the administration of the United States. The president of the United States, Donald Trump, has already introduced tariffs on imports of several key US commercial partners. UU. And he indicated that Europe could be the next objective.
But there is a frequent policy movement in the US position, with pauses, delays and exemptions in abundance as the negotiations and promises of reciprocal measures of the target countries continue.
“Tariffs are a tax. They are a tax on consumption and production, and we know that taxes have a very clear impact on the economy,” Centeno said on Friday, warning that, ultimately, no one would gain from a tariff war.
A brilliant point ahead for Europe could be a possible impulse of defense expenditure of the European Union, which was introduced earlier this week in the back of sour relations between the United States and Ukraine.
If these packages are “well designed,” they could have a positive impact on Europe’s economy, Centeno said.
Germany also announced plans to boost infrastructure and defense spending this week, although the proposal must first approve some obstacles before it can be implemented.
More rates cuts ahead?
Centeno also addressed the prospects for the interest rates of the ECB, more ornaments were expected to be expected.
“We believe that the trip is very clear, although these tariff cuts [were] Implemented because the European economy is stagnant, we have in our baseline a projection of inflation that goes to 2% in the medium term, but that includes an additional adjustment in the rates, “he said.
However, the Central Bank needed to remain “open” and follow a data -dependent approach and meetings by meeting, especially due to the current uncertainty regarding economic policies, Centeno said.
The ECB announced on Thursday its sixth reduction of the interest rate since June last year, taking its key rate, the rate of the deposit installation, another quarter of a point less than 2.5%. The measure had been widely expected by the markets.
In a statement that announced the decision, the ECB also modified the language it used to characterize monetary policy to say that it was now “significantly less restrictive”, a change of the previous description of “restrictive”.
Interpretations of what this could involve for the path of the rate to which it was diverged, with some analysts and economists who say that he suggested that political leaders were becoming more caution about the reduction of rates. Others said that the central bank statement indicated more cuts ahead, but that a pause in the cutting cycle could now be on the horizon.
The markets were the last prices in a probability of around 57% of the maintenance rates of the stable ECB during its April monetary policy meeting and a 43% probability of an additional reduction of a quarter quarter.
Beyond the ECB statement, markets are likely to also take into account developments around tariffs and European defense spending on their evaluation of what could come after the ECB.
“The decision in April will carry on board all the information we will obtain until then,” said Centeno of the Central Bank.
