Eurozone leaders meet to discuss bank stability

The leaders of the euro zone countries will meet with the head of the European Central Bank (ECB), Christine Lagarde, on Friday, to discuss the possible consequences of the collapse of several large banks in the US and Switzerland.

Inflation, which has reached worrying levels following high government spending during the coronavirus pandemic, as well as the Russian invasion of Ukraine, will also be high on the agenda.

The ECB president was expected to say that banks in the eurozone – which includes 20 EU countries that share the euro currency – are safe. She is also expected to face questions over the ECB’s interest rate hikes, introduced to curb rising inflation.

Why are eurozone leaders worried?

Concern over the collapse of Silicon Valley Bank and Signature Bank earlier this month only got worse as the impact rippled across the Atlantic, putting 167-year-old Swiss bank Credit Suisse at risk. The bank had to be rescued with a purchase by rival UBS.

The turmoil in the banking sector comes after years of cheap money were restricted by rising interest rates in the EU as well as the US.

Russia’s full-scale invasion of Ukraine and the subsequent cut off of gas supplies to Europe has sent energy prices soaring, hitting households and industry across the EU.

While inflation has slowly started to come under control and the bloc has avoided a technical recession, there are fears that a banking crisis could trigger a larger recession like the one seen after the 2008 banking crash.

ab/rc (dpa, Reuters)