In an interview with Spanish newspaper El Mundo published on March 22, 2026, European Central Bank Vice-President Luis de Guindos underscored the need for heightened monitoring of inflation expectations amid escalating tensions from the Middle East war. Conducted on March 20 by journalist Carlos Segovia, the discussion highlighted the conflict's "intense" effects on both euro area growth and inflation.
WAR'S INTENSE IMPACT
De Guindos described the conflict as the main source of uncertainty. At the ECB's recent Governing Council meeting, officials noted the war's strong initial shock on inflation and growth, with impacts intensifying the longer and more widespread the hostilities become. "En la reunión que mantuvimos el pasado jueves constatamos en el BCE que el impacto va a ser intenso tanto en crecimiento como en inflación. Cuanto más largo sea el conflicto y cuanto más extenso sea, el impacto va a ser evidentemente mayor," he remarked in the Spanish version of the interview.
Despite these pressures, de Guindos dismissed recession fears. Even in severe scenarios, the ECB anticipates positive growth across the euro area. "No, we don’t expect it to [trigger a recession]. Even in the most severe scenarios, we are still seeing positive growth," he assured, cautioning against over-reliance on precise forecasts in such volatile times. The ECB's baseline scenario assumes a peak in energy prices in the second quarter of 2026, followed by a sharp decline in oil and gas prices.
RATE DECISIONS PENDING
With the ECB's next Governing Council meeting approaching, de Guindos signalled that fresh data on the conflict will guide policy. The ECB is not pre-committing to a particular rate path. Pressed on whether rate increases are now more probable than cuts, he replied: "We are ready to respond as necessary. Of course, we are concerned by the situation." Monetary policy cannot shield the economy from the war's first-round effects, but the ECB stands vigilant against second-round inflation spillovers.
"Monetary policy cannot prevent the war from having an initial impact on both inflation and growth, but the ECB can monitor the situation and be alert to potential second-round effects," de Guindos told El Mundo. He urged viewing the shock as transitory to avert entrenched inflation.
FISCAL CONSTRAINTS TIGHT
A budget is the main economic policy instrument of any government, particularly at times of heightened uncertainty. "Los presupuestos son el principal instrumento de política económica de cualquier gobierno, sobre todo en momentos de alta incertidumbre. Y eso vale para España y para todos los países de la Eurozona," he said. On Spain's situation, "No me quiero referir a ningún país concreto, pero la falta de presupuesto consecuencia de la falta de una mayoría clara en el Parlamento no refleja solamente el problema de que no haya presupuestos, sino que indica incapacidad para adoptar otras medidas en un momento delicado como este."
De Guindos said market moves suggested investors do not expect the conflict to go on too long or be too costly, but stressed that uncertainty remained heightened. He noted internal divisions in many parliaments but said progress had been made, citing budgets passed in France and Belgium.
SPAIN'S RESILIENT EDGE
Turning to Spain, de Guindos praised its economic strengths entering the crisis. Over the past decade, the country has boosted competitiveness and rebuilt a robust banking sector post-financial crash, now solid in capital and liquidity to support lending. Cyclical tailwinds include immigration-driven population growth—accounting for over half of recent GDP expansion per ECB estimates—more than €55 billion in non-repayable Next Generation EU funds, and tourism. These propelled Spanish GDP growth to nearly double the eurozone average.
"Spain’s economy has had two major advantages. The first is that it has become much more competitive. The second is that, after the severe crisis, the Spanish banking sector is sound," de Guindos explained. He cautioned that these cyclical factors are not without their drawbacks, stressing that EU funds need to be invested well.
LEADERSHIP SUCCESSION
As de Guindos nears the end of his eight-year term, he expressed hope for continued Spanish representation on the ECB Executive Board, citing the nation's importance and sound financial system. A Spanish bid for the presidency—potentially via former Banco de España Governor Pablo Hernández de Cos, now at the BIS—remains possible, though President Christine Lagarde intends to serve out her term. "It’s always a possibility and we will see," de Guindos said. "No sé si ya el año que viene, pero yo espero que lo haya pronto. Habrá varios puestos que vencen en los próximos años y España es una economía muy importante de la zona euro, que además tiene un sistema financiero saneado y es competitiva."
The interview also touched on the Banco de España's subdued commentary on government policy, with de Guindos confident in its expert staff. Looking ahead, his post-ECB plans include offers from a private university to create a professorship in European political economy and from a business school.
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