The economic environment in Europe, the banking sector and the expected challenges were analyzed by ECB Vice President Luis de Guidos, Governor of the Central Bank of Cyprus Konstantinos Herodotou and Chairman of the Board of Directors. . National Bank of Greece, Gikas Harduvelis, in a related discussion on inflation dynamics, monetary policy and financial stability in the context of 8th Delphi Economic Forum.

Luis de Guidos noted that “we have good news, we will not have a recession. We have very little unemployment, a negative figure. Inflation is falling and will continue to fall in the coming months.”

He then stressed that “Europe has managed to avoid an artificial recession, but also that such a prospect is not in sight for 2023, with all key indicators remaining favorable.” He added that “there is also bad news. There are also some tensions from abroad. Let’s keep a close eye on upcoming events. Financing conditions have been tightened.”

The ECB vice president also spoke of a similar evolution in labor costs across the eurozone. “As for wages, we are seeing an acceleration in its growth. In 2023, we will have an increase of 5%,” he stressed.

Regarding any liquidity risk in Europe, he stressed, among other things, that “we are in the phase of targeting something. There is a downward trend in real estate prices. We have moments that worry us. Banks are resilient, in a better position than 10-15 years ago. Rising interest rates are beneficial to European banks. We can be silent, but not rest.

For his part, Governor of the Central Bank of Cyprus Konstantinos Herodotou said: “There are problems, such as wage increases. To avoid a permanent increase, because it could affect inflation.” He noted that while China’s new “opening up” could solve some problems, it could also affect inflation.

He talked about the 300 basis point increase over the last period, saying, “We were down 50 basis points and we had to cover a wide range to get there.”

On monetary policy, he noted: “Decisions on interest rates, until they affect the economy, take 16-18 months. Structural inflation persists and we will have to deal with it.”

Regarding the banking crisis, after the events with the US banks and Credit Suisse, ECB Vice President Luis de Guidos said, among other things: “In Europe, the situation is not at all the same as before. The US is a very peculiar case.”

He stressed the need for the eurozone to pay attention to the evolution of financial conditions as demand for credit declines.

For his part, the governor of the Central Bank of Cyprus, Konstantinos Herodotou, on the same issue, pointed out that “memories of previous financial crises created tension in the banking market. There is volatility in the market. There are also tools that can be used in these cases. It’s too early to know what the markets think.” “In terms of the Cypriot banking sector, we have some of the largest liquidity in the EU.” he added.