Luis de Guindos, vice-president of the European Central Bank (ECB), has stressed the need for broader fiscal consolidation in Spain, in a context marked by the reduction of market liquidity. According to the former minister, from January next year, the organization will stop buying public debt and reinvesting it, which will lead to a monthly withdrawal of 40 billion euros, further reducing market liquidity. This decrease in liquidity could cause problems in granting credit, affecting both families and businesses.
Guindos, who participated in the “VII Banking Forum: Banking with the change in the rate scenario”, organized by elEconomista.es, expressed his concern about the possible consequences that the reduction of liquidity could have on credit, which could complicate access to financing in an environment already affected by the economic slowdown in Europe. Faced with this panorama, he insisted on the importance of greater fiscal consolidation to guarantee economic sustainability in the medium term. He also warned that this withdrawal of 40 billion could further aggravate the situation if adequate measures are not taken to mitigate its effects on the real economy.
“Fiscal consolidation is essential in Europe, and he mentioned that the debt-to-GDP ratio has increased in several countries, exceeding 100% in some cases, which will require a reasonable consolidation process,” he stressed.
Furthermore, De Guindos explained that although there is a lot of liquidity in the market, this has not been transferred to deposits despite the increase in interest rates. It has been observed that liquidity is decreasing due to repayments made during the pandemic, which has led to a significant decrease in the central bank’s balance sheet.
