Authorities are checking for signs of slowdown if there is a power outage from Russia

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Luis de Guindos warns European economy is unlikely to plunge into severe recession but urges interest rate hikes this month

The analyzes carried out by the various financial institutions, such as the European Central Bank (ECB), or the fiscal one, such as the Independent Authority (AIREF), are pessimistic for the coming months, although for the time being they have a recession in the economy. Recession understood as more than two consecutive quarters of negative GDP (gross domestic product). A scenario that doesn’t seem the most likely, although the delay is. That is to say, Europe is not growing as strongly, even distantly, as planned this year.

Those are the conclusions presented by representatives of both institutions this Wednesday, always closely linked to what is happening in relations between Russia and Europe. And the umbilical cord that unites both extremes remains gas, the epicenter of the war in Ukraine. If Russian President Vladimir Putin turns off the tap, the EU economy will suffer. And that will happen to a greater or lesser extent, depending on how the Kremlin implements that energy measure after the summer.

The ECB vice-president indicated on Wednesday that the interruption of Russian gas to Germany could lead the German country into recession and this could in turn “drag” the entire eurozone. In any case, Luis de Guindos has clarified that the monetary organization – which will meet formally on the 21st to announce the first rate hike in the eurozone since 2014 – is not handling the entry of the European economy into recession in its central scenario. , although there is a “significant economic slowdown” which, coupled with high inflation, expects a “very complex” scenario for the coming months. “They will be very complex for the European and global economies due to the coexistence of high inflation with clear signs of economic slowdown, which are already there. We have already started to see that household consumption in Europe is suffering and to this we must add the uncertainty of the war, which stops many investment projects,” he indicated.

The ECB insists the US will have a shorter recession than Europe before growing again, as the direct effects of the Russian invasion of Ukraine are most visible in the Old Continent.

To deal with this context, the ECB has already started normalizing monetary policy, with a 25 basis point rate hike on July 21 and another in September that Guindos says “may be higher” than that quarter of a month. if the inflation situation continues as it is now. “It is a normalization of monetary policy adjusting to the high inflation in the eurozone, which is clearly above 8%, and which is no longer solely produced by food and energy, but much more broadly based,” it said.

For her part, the chairman of the Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, “now” excludes the possibility of a recession in Spain, although she has acknowledged her concerns about what will happen to the gas supply in light of the the winter. “In AIReF’s central scenario, we’re not thinking about that possibility at the moment,” he assured.

Herrero predicts that Spain will achieve “significant” growth in 2022 based on the positive evolution of the service sector and especially tourism. In addition, and despite the negative criticism of the “slow” implementation and commitment, the agency also expects an impact from the Recovery Plan.

In any case, it has warned that some of the risks it has been warning about for a few months (bottlenecks or energy) are already manifesting, which is why it will reassess its downward forecasts in its next report on July 19, as most analysts do.

Source: La Verdad

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