Europe’s struggling economists are concerned – a view that has been echoed by senior European central bank policy maker Mário Centeno.
“I’m very worried about the European economy,” Portuguese governor Centeno told CNBC’s “Squawk Box Europe” on Friday.
On Thursday, the ECB revised its total forecast for the euro zone’s GDP to 0.9% of growth in 2025, down from a previously expected 1.1% expansion. The eurozone’s seasonally adjusted GDP rose by 0.1% recently in the fourth quarter.
Centeno revises the decline in growth outlook with reduced exports and investments, echoing the ECB statement.
“I think that special investment is very gentle in Europe. We are going to go back to the level of investment in the private sector in 2023, six years in terms of housing investment (we will not go back to 2022 in 2028),” he explained.
“These numbers raise some questions about the recovery in Europe,” Centeno added.
Concerns about a slow European economy have accelerated in recent months after repeated U.S. government threats to tariffs. U.S. President Donald Trump has introduced import taxes from several major U.S. trading partners and said Europe may be the next target.
But there is Frequent policy movements In the U.S. position, suspensions, delays and exemptions continue as negotiations and pledges of reciprocity measures are being made in the target country.
“Tariffs are taxes. They are taxes on consumption and production, and we do know that taxes have a very obvious impact on the economy,” Centeno said Friday.
A highlight in Europe could be potential EU defensive spending, which was launched earlier this week behind the sour relationship between the United States and Ukraine.
If such parcels were “well-designed”, they could have a positive impact on the European economy, Centeno said.
Germany is also this week Announced plan To increase infrastructure and defense spending, although the proposal must first pass some obstacles before it can be implemented.
Further cut speed?
Centeno also addressed the outlook for the ECB rate and is expected to further propose pruning.
“Although the European economy is stagnant, these lower tax rates do be implemented in the benchmark, but in the medium term, we do have a 2% inflation forecast in the medium term, but that includes further adjustments to the rate,” he said.
However, central banks need to remain “open” and follow a data-dependent approach, especially due to current uncertainty about economic policies.
ECB announced on Thursday The sixth interest rate The cuts since June last year have dropped to 2.5% with its key interest rates, deposit facility rates, and another quarter of the point. The market has been widely expected by the market.
In a statement announcing the decision, the ECB also adjusted the language it used to characterize monetary policy to show that it is now “less restrictive” as a change from a previous description of “restrictive”.
Explanation This may mean future interest rate paths DifferencesSome analysts and economists say this shows that policy makers are becoming increasingly cautious about lowering rates. Others say the central bank statement shows that there are more cuts in the cut situation, but pauses in the cutting cycle can now be present.
At the monetary policy meeting in April, the chances of stable ECB holdings were about 57%, while the market prices were about 57%.
In addition to the ECB statement, markets may also take into account developments in tariffs and European defense spending when evaluating what may happen next for the ECB.
“The April decision will take charge of all the information we will receive,” commented Centeno of the central bank.
