European Central Bank Vice President Luis de Guindos said Thursday that the euro area economy has proved fairly resilient to date, supported by a strong labour market, but cautioned that there may be challenges ahead and these developments may well have a dampening impact on growth in the region. "We face exceptional uncertainty generated by geopolitical fragmentation and the volatile trade policy," he added.
De Guindos stressed that it is important for the ECB to closely monitor what is happening in the Eurozone's real economy, partly as an early indicator for the inflation outlook. With inflation around the ECB's 2% target, he added, structural reforms and growth‑oriented fiscal policy become crucial to foster productivity and competitiveness in the EU.
The official warned that the stakes have never been higher for Europe and that, to deliver on its fundamental values, Europe needs to deliver on the long‑term growth and resilience of its economy.
He noted that the recent sea change in U.S. economic policy and the multilateral rules‑based system has been an important wake‑up call for Europe, and that the pattern of globalisation is set to shift significantly and give way to increased economic fragmentation on a global scale. De Guindos added that unreliability and unpredictability are likely to persist for years to come, making uncertainty a defining feature that will not be overcome any time soon - and extending beyond trade to other domains such as monetary, fiscal or national security policy.
The ECB's Vice President also affirmed that the use of the U.S. dollar in international funding, payment and trade transactions - or as a reserve currency - will not be challenged in the short term, while the role of the euro can gradually expand.