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ECB building in Frankfurt am Main (archive photo): Immeasurable human suffering
Photo: Daniel ROLAND / AFP
The European Central Bank (ECB) is concerned about financial stability in the euro zone in view of the Ukraine war.
According to the ECB's Financial Stability Report, higher energy and commodity prices as a result of the Russian attack on Ukraine posed a threat to economic growth and inflation developments.
"The terrible war in Ukraine has caused immeasurable human suffering," said ECB Vice President Luis de Guindos.
"It has also increased risks to financial stability, as it affects virtually every aspect of economic activity and financing conditions."
The reaction of the financial markets to the beginning of the war was largely orderly, the report goes on to say.
However, the prices for raw materials and energy are still high and subject to fluctuations.
This has led to stress on the relevant markets.
Further price adjustments could therefore occur if the outlook for economic growth deteriorates further or if inflation turns out to be higher than expected.
The ECB sees a number of possible dangers.
She points to the uncertain further course of the Ukraine war and the expected normalization of monetary policy in developed economies.
The ECB has also announced a key rate hike for July.
In addition, the corona crisis could worsen again and the Chinese economy could continue to weaken.
Companies in the eurozone that have not yet recovered from the pandemic are particularly at risk of insolvency.
This also affects other highly indebted companies that can no longer cope with rising interest rates on loans.
For banks, the profit prospects have clouded over.
However, few banks have direct exposure to Russia.
"We are faced with the task of normalizing monetary policy at a time that is anything but normal."
Fabio Panetta, ECB Director
The central bank is currently faced with an unprecedented series of economic shocks, said ECB Director Fabio Panetta.
"Like other major central banks, we are faced with the task of normalizing monetary policy at a time that is anything but normal." In this difficult situation, a gradual tightening is recommended.
The central bankers understand normalization to mean turning away from the low and sometimes zero interest rate policy of recent years, which was originally intended to cushion the effects of the financial market crisis.
In the past few days, a debate has arisen in the ranks of the ECB about the right reaction to the high inflation in the euro zone.
The trigger was a post by ECB President Christine Lagarde on Monday, in which, after much hesitation, she announced an initial interest rate hike in July and an end to negative interest rates for late summer.
Some central bankers have now spoken out in favor of more decisive tightening, while some have tended to follow Lagarde's line.
Compared to other central banks, the ECB's reaction to the high inflation has so far been rather hesitant.
mamk/dpa