La Stampa: “Global uncertainty is very high, but we are ready to act if needed”

Governor, the Eurozone is grappling with a severe exogenous shock linked to Iran. Considering the pressure on energy prices, with rising inflation forecasts, and global logistics bottlenecks, what specific tools does the European Central Bank have to prevent these headwinds from turning into a perfect storm?

The context outlines a classic negative supply shock, a phenomenon capable of generating more inflation and lower growth. This dynamic is true for Europe and the global economy as a whole. But we do not know yet the exact dimensions of the phenomenon. For this reason, we published three distinct scenarios, the materialization of which will depend on the intensity and duration of the conflict. From a macroeconomic perspective, the latest news does not bring favorable signals.

What does that mean?

Our primary responsibility as central bank consists of preventing second-round effects. The European Central Bank has no control over oil prices, but it has the ability and duty to anchor the inflation expectations of households and businesses to our medium-term target of two percent. We are ready to act in this direction if needed.

Could an interest rate intervention arrive as early as April?

The debate on pre-established dates appears very premature, and there has been some overinterpretation by financial markets in the latest days. We reiterate that we are not on a predetermined path. Our decisions remain tied to the evolution of macroeconomic data. European citizens and businesses can rely on our determination to stabilize inflation at two percent over the medium term.

Markets are pricing in a prolonged war in Iran. Given the military situation in Yemen and the blockade in the straits of Hormuz and Bab al-Mandab, the perimeter of the Arabian Peninsula is at risk. Do you fear a recession for the European economy?

The military situation is unstable and this generates volatility in financial markets. Even in our most severe scenario, we expect a slowdown in growth, but the figures would remain in positive territory. The European economy proved resilient before the outbreak of this Iranian crisis. We start from a rather good position.

In what sense?

Unlike with the Russian war in Ukraine, we do not face a pre-inflationary situation. In February 2026, inflation stood at 1.9 percent, whereas in February 2022 it exceeded five percent. As President Christine Lagarde recalled, this time the context is different, but we maintain a high level of vigilance in any case.

In this framework of radical uncertainty, how difficult does it become to calibrate monetary policy and provide forward guidance on interest rates?

In times of uncertainty, it would be especially inappropriate to provide forward guidance on the interest rate path. What is relevant is a clear and unequivocal commitment to the final inflation target. In June 2025, we updated our monetary policy strategy ; we highlighted the probability of suffering a greater number of supply-side shocks and hence the need to use multiple scenarios. We are precisely implementing the conclusions of that strategic review to ensure an agile approach, ready for any possible development.

What role must Europe carve out for itself in this phase of geopolitical uncertainty, caught between the competition of global superpowers like the United States and China?

Europe must enhance and accelerate its own internal transformation. We have a clear roadmap available thanks to the reports drafted by the two former Italian Prime Ministers, Enrico Letta and Mario Draghi. There is among others an inescapable green agenda, based on the transition to non-fossil energies, whether renewable or nuclear. It’s the only way to diminish our dependency to recurring oil shocks like the present one. 

Why is that?

It would be dangerous to only jump from one emergency to another, moving from the war in Ukraine to the conflict in Iran, offering contingent responses. The real response to international geopolitical tensions consists in the implementation of a long-term European agenda.

The risks of financial fragmentation remind many observers of the dark 2007-2008 biennium or the sovereign debt crisis. Is today's financial landscape capable of absorbing global repercussions?

From the perspective of financial stability, our condition is superior to that of 2007. This result derives from a rigorous banking regulatory framework. Thanks to the Basel 3 requirements and the creation of a unified supervision system, there is no risk of a banking crisis in Europe.

What follows from that?

We must maintain maximum attention on global financial markets, watching the dynamics of US stock indices, private credit, and the crypto sector with rigor. Systemic risks appear lower in the Old Continent compared to the United States. We observe furthermore a trend towards deregulation on the other side of the Atlantic, a direction which would be dangerous especially in the current market context.

The non-bank financial institutions sector includes large private credit operators. Do you perceive the risk of systemic contagion originating from this specific segment?

Non-bank actors represent a vast and heterogeneous category, many parts of which are useful to the economic system; just think of insurance companies or investment funds. The risks concentrate in private markets and, in particular, private credit. The market issued early warnings. Private credit needs greater transparency, given the lack of data, and careful liquidity monitoring. The rules in force for banks must not be applied to these entities, but liquidity management is a critical factor. We notice a possible trend towards selling these retail products through instruments with partial liquidity.

And is that a problem?

Yes. This combination of retail investors and illiquid assets generates a dangerous mix. In France, we are developing a system-wide stress test to map the interconnections between banks, non-banks, and insurance companies, a research avenue also followed by the Bank of England.

Markets expect a surge in energy costs and related products in the short term. Do you foresee a recalibration of inflation across different sectors in the coming quarters?

We obviously see an increase in the costs of energy and connected goods. Our role consists nevertheless of preventing the transmission of this energy shock into a generalized rise in inflation. In our macroeconomic scenarios, even in the most acute variant, we forecast an inflationary peak around 2026 and 2027, with a subsequent return to our fundamental two percent objective. And these projections do not include an adequate monetary policy reaction yet, resulting in an overestimation for that two-year period.

What fiscal leeway do Eurozone governments have to protect consumers and contain second-round effects in an era of fragile budgets?

Fiscal space is minimal for most of our countries. Government interventions, if any, should follow the three cardinal rules, the three "Ts": Temporary, Targeted, Tailored. They should be temporary measures, aimed at the most vulnerable sectors of society, and custom-tailored to needs. This approach is essential. Measures should not fuel additional demand in a market already suffering on the supply side.

The documents drafted by Letta and Draghi demand a European change of pace. Does this atmosphere of uncertainty represent the ideal time to launch reforms, or is there a fear of compromising stability?

The time for structural reforms is always right . Observing the long-term picture from my standpoint as governor over the past eleven years, the most evident phenomenon is the decline in European potential growth. At the beginning of the millennium, we traveled around two percent annually.

And now?

Today we are close to only one percent, and even less in some countries . This gap produces concrete effects on real incomes, employment, and public finances. The answer lies in implementing the Draghi and Letta reports, and domestic reforms, to bring our potential growth back towards one and a half percent. This would be the best economic response to citizens' social expectations.

There is much discussion about de-dollarization and the international role of the euro. Is the global system moving toward a diversification of reserve currencies?

I am cautious regarding the use of the term de-dollarization, as the dollar maintains a central position. There is rather a growing appetite from international investors for diversification. The euro can play a strategic role in this game. The best approach to expand our currency's influence coincides with the completion of the Savings and Investment Union, which we strongly support together with my friend the Bank of Italy Governor Fabio Panetta.

With what objective?

The goal is to leverage abundant European savings to finance vital sectors such as artificial intelligence, clean energy, and defense. This is a key solution to Europe's structural challenges, a political agenda that requires a binding deadline for its realization, set for 2028.

What priorities do you suggest for Italy at this crucial juncture in global finance?

I don’t have to dispense advice to Italy! I wish to highlight Italy's primary role in the remarkable consolidation of the euro over the last decade, for example through Mario Draghi. And your country overcame banking crises, showing great solidity starting in 2015. Our remaining common challenge, in Italy as in the rest of Europe, remains potential growth and the push for technological innovation. We have the levers to forge our economic destiny without depending on external actors.

The consolidation of the banking sector in Europe proceeds at a slow pace compared to the concentration of institutions in the United States. What obstacles prevent the birth of European credit champions?

By practice, I do not express judgments on specific market operations . Our task as supervisors consists of implementing an authentic Banking Union. This goal will be achieved when cross-border consolidation within European borders becomes as simple as national operations. This is the direction of travel for our continent. We made significant progress, but the journey is not complete.