Challenges for Europe and the path forward, according to ECB Vice-President

Luis de Guindos, Vice-President of the European Central Bank, delivered a speech at the Ragnar Nurkse Memorial Lecture organized by Eesti Pank in Tallinn. He highlighted Europe’s resilience amid recent crises, including energy shocks and inflation surges caused by geopolitical conflicts such as the war in the Middle East.

He noted that the euro area grew by 1.5% in 2025, supported by domestic demand, low unemployment, and rising incomes, with growth expected to continue into 2026. However, increased uncertainty and geopolitical tensions, especially disruptions in energy markets, pose risks to growth and inflation.

De Guindos emphasized that the ECB has maintained interest rates and remains data-dependent, with inflation projected to average 2.6% in 2023 before converging to the 2% target. He discussed scenarios where prolonged energy shocks could lead to higher inflation and lower growth.

The speech outlined four priorities for strengthening Europe: completing the Single Market, building a genuine savings and investments union, securing technological sovereignty, and simplifying regulations. He stressed that deeper integration and reducing vulnerabilities are essential for Europe’s long-term stability and growth.

He concluded by referencing Ragnar Nurkse’s work on stability and prosperity, emphasizing the importance of collective efforts to address Europe’s challenges and foster resilience.