(Update with new data)
Frankfurt (Germany), April 6 (EFE). The Vice President of the European Central Bank, Luis de Guindos, today urged accelerating the green transition to increase Europe’s energy security and reduce dependence on Russia.
“The invasion of Ukraine demonstrated how vulnerable Europe is due to heavy dependence on fossil fuel imports from Russia,” de Gindos said.
“Accelerating the green transition is a key priority from this perspective as well, not only to address urgent environmental and climate challenges, but also to help increase energy security and protect the EU economy from rising energy prices,” de Guindos added. At a conference on European financial integration co-organized with the European Commission (EC).
The Vice President of the European Central Bank added that the first weeks after the invasion there was a reaction in the European bond markets.
According to de Gindos, “the announcements of sanctions against Russia led, at least initially, to a slight divergence in sovereign and corporate bond yields in the eurozone countries.”
But these moves were smaller than those that occurred after the global financial crisis and at the start of the pandemic.
De Guindos believes that the impact of the war on financial stability for the eurozone has been “relatively contained so far”.
Markets have performed well overall, and unlike in March 2020, after the outbreak of the pandemic and the start of confinement measures, there was no escape into cash.
A few banks and companies with significant direct exposure to Russia and Ukraine were affected, but the economic impacts have not had a significant impact on the European Union’s banking or financial systems, according to de Guindos.
The initial stock price reaction of Eurozone banks indicated a much stronger impact than their direct exposure, which was less than 1% of the banks’ assets, would suggest.
For this reason, the Vice President of the European Central Bank is more concerned about the economic impact of the war in Ukraine on growth and inflation.
The European Central Bank also published its biennial report on financial integration in the eurozone.
After the outbreak of the Covid-19 epidemic, financial fragmentation occurred in the eurozone but was reversed relatively quickly, according to the European Central Bank.
Once a return to pre-pandemic levels of integration was achieved, financial integration increased and became stronger under the pressure of other waves of infection.
The measures agreed by the European Central Bank and the European Union were “political interventions that kept the division at first” and which allowed integration to return to pre-pandemic levels.
The European Central Bank decided to buy more debt, make liquidity easier for banks and require less capital from them to lend to businesses and households.
The European Union has approved the recovery plan, known as NextGenerationEU, to transform the economy and create jobs. About 2 trillion euros will help rebuild Europe after the pandemic.
The European Central Bank believes that “the NextGenerationEU program provides a unique historical opportunity to bring private investment capital markets in the Eurozone and the European Union to levels comparable to those in other major economies.”
De Guindos also highlighted the need to move forward with harmonizing insolvency and withholding legislation in eurozone countries.
“This will help create a more integrated financial sector that can easily operate across borders, including green market sectors,” according to the ECB Vice President.
Likewise, he added, progress is needed in establishing a European deposit guarantee.
Debt issuance procedures should also be more integrated and aligned to reduce costs and allow investors to better spread risk across EU countries. EFE
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