2023-05-15 16:57:34
© Reuters. FILE PHOTO. The European Commissioner for the Economy, Paolo Gentiloni, arrives for the meeting of finance ministers of the euro zone in Brussels, Belgium
BRUSSELS (Reuters) – Europe is not in danger of a real estate or debt crisis as a result of the European Central Bank’s (ECB) rate hike, European Economic Commissioner Paolo Gentiloni said on Monday.
The ECB has raised rates a total of 375 basis points since July to curb inflation that reached double digits last fall and which, according to the euro zone central bank, will take until 2025 to return to its 2% target. .
This makes borrowing more expensive for states, many of which are already heavily indebted to sustain economies through the pandemic and through a cost-of-living crisis caused largely by Russia’s invasion of Ukraine.
It also increases the cost of mortgage servicing, which is linked to the rate of inflation.
Speaking to reporters ahead of a meeting of euro zone finance and economy ministers to discuss the latest economic forecasts from the European Commission, Gentiloni said some countries might struggle, but not the 27-nation EU in its set.
“The housing sector creates different problems in different countries – it depends on the nature of (…) to what extent you have mortgage structures linked or not to inflation,” Gentiloni said.
“In some countries we will face difficulties, but in general I don’t see a European crisis from this point of view and I don’t see real European difficulties in terms of debt management.”
“Yes, interest rates are increasing the cost of debt, but this is happening in a limited and perfectly manageable way,” he said.
The Commission forecast on Monday that growth this year and next in the 20 countries that share the euro will be slightly higher than forecast in February, even if inflation stays higher for longer, and that public debt will decline.
(Reporting by Jan Strupczewski; Editing by Catherine Evans, Spanish editing by Jose Munoz)
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