Interview with Luis de Guindos, Vice-President of the ECB, conducted by Anja Ettel and Holger Zschäpitz
17 September 2025
President Donald Trump is openly attacking the independence of the US Federal Reserve. At the ECB, you are the highest level of protection when it comes to financial stability. How worried are you about events in the United States?
An independent central bank is the best protection against high inflation. Inflation expectations only stay low if investors and consumers trust the central bank to keep prices stable. Otherwise, there is a risk of a dangerous spiral of rising prices and wages. It’s particularly critical if monetary policy is constrained by fiscal policy – what we call fiscal dominance.
Yet your arguments don’t seem to be making much of an impression on Donald Trump.
My point is very clear. If governments interfere in monetary policy, it leads to inflation and increasing interest rates further down the road – this isn’t theoretical, it’s borne out by history.
How is the ECB preparing for this scenario?
What happens in the United States is very important to us – the US economy plays a central role on the global stage. But I don’t want to get involved in speculation about what might happen. What matters to us is the ECB’s legally guaranteed independence – and this remains valid.
The question is, for how long? France has a budget deficit of well over 6% for this year – a clear breach of EU rules. The Treaties seem to be losing their strength.
The situation isn’t comparable with what’s happening in the United States. The ECB isn’t being attacked politically. Our independent monetary policy plays a decisive role in the welfare of European citizens. And the best way for us to convince people is to fulfil our mandate: stable prices in Europe.
But what if government bond yields diverge in the euro area, as happened during the European sovereign debt crisis? Wouldn’t you have to intervene at that point, even if the monetary policy conditions speak against it?
For us, it’s completely clear that the European Treaties have priority. With regard to the current challenges – whether in the United States or elsewhere – we will do what we have to do to reach our goal of price stability. A central bank is not only independent on its own – it needs a stable political framework. France is not the only country subject to an excessive deficit procedure. Yet, it is specifically these rules that are crucial for sound fiscal conditions in Europe. With defence spending rising and other fiscal challenges, it is especially important to signal to financial markets that we will continue to be reliable when it comes to monetary policy. On yield spreads, yes, in some countries they have increased – but in others they have gone down again. This is often overlooked.
How worried are you about the situation in France? Could the problems be a catalyst for a new euro area crisis?
I’m not going to comment on any one particular country. Our call for stability applies equally to all euro area countries – especially in times of increasing global uncertainty.
Has the ECB’s Governing Council already discussed using the transmission protection instrument (TPI)? The instrument should enable the ECB to purchase government bonds if financing conditions in individual euro area countries worsen to an unjustifiable degree.
No. In the Governing Council, we discussed the TPI when we were setting it up three years ago, but since then we haven’t talked about it further – also not in the context of potentially using it in a particular country.
What exactly would cause you to use it? How big would the spread have to be for you to say “let’s go”?
The criteria are publicly accessible and clearly defined – anyone can read them for themselves. I won’t comment on any further details. What I can say is this. Financial markets, including sovereign bond markets, are calm and orderly. There are no signs of liquidity strains and, from our point of view, the spreads between sovereign bonds in the euro area are not a source of concern at the moment.
You were Minister of Finance in Spain for a long time and now you’ve been part of the ECB’s Governing Council for seven years. As you know both sides, do you ever ask yourself why EU Member States show so little European spirit?
Jean-Claude Junker comes to mind. He once said “We all know what to do, but we don’t know how to get re-elected once we have done it.” That captures it perfectly. Nevertheless, change is possible. Look at Portugal, Italy, Greece or my country Spain – compare ten, 15 years ago with today. These countries have overcome the crisis and are significantly stronger today – thanks to their reforms.
Not so difficult when you get billions in EU funding, like the Next Generation EU fund. Can you understand why people in Germany are frustrated?
I see it differently. European solidarity creates confidence in the financial markets and preserves stability. We all profit from that. If countries like Italy or Spain develop positively, that’s a win for German exports. And for context: Spain has received €40 billion in funding – with an annual GDP of €1.3 trillion. The Next Generation EU fund was helpful but not the decisive factor for success.
You talk of Spain’s successful transformation, yet the country has the highest unemployment rate in Europe. That doesn’t sound very successful.
Spain has two big strengths: a sound banking sector and a high level of competitiveness. Tourism has recovered since the end of the pandemic and the country benefits from a sizeable immigrant workforce, predominantly from Latin America. I won’t argue that EU funding wasn’t important. However, structural reforms played a much more decisive role. And yes, an unemployment rate of 10% is still too high. But that figure has already halved and is sinking further.
Europe has long relied on Germany’s strength. But now Germany itself is faltering and the Next Generation EU funding will end in 2028. Should these types of transfers continue on a permanent basis?
Solidarity must not be a one-way street, that is very clear. When countries make progress through mutual support, everyone benefits. But to do that, they also need to deliver: implement reforms, take responsibility. I’ve always agreed with my friend Wolfgang Schäuble on this matter. His idea of “tough love” applies more than ever: support, yes – but only under clear conditions.
And Germany?
I still clearly remember when Germany was labelled the “sick man of Europe”. But then, six years later, the country was once again an engine of growth. I have the utmost confidence in the German economy. Of course, there are challenges: Germany has relied on cheap energy from Russia for too long. And its current business model, with its focus on exports to the United States and China, faces challenges given the many trade disputes. However, with its additional public investment in infrastructure, Germany has taken an important step in the right direction – and I say this as someone who has been travelling through this country for nearly eight years. Germany will adapt to the new environment, and it’s doing so already.
Last week the ECB’s Governing Council decided not to lower interest rates. Markets are taking this to mean that rates won’t be reduced at all, neither this year nor next. Are they right?
There are two key takeaways from the meeting. First, we consider the current interest rate to be appropriate under the circumstances – based on inflation developments, our projections and the transmission of our monetary policy. Second, we are living in a very complex and uncertain world with numerous risks – from geopolitical tensions to trade issues, like those between China and the United States. This can alter trade flows, for example, through increased Chinese exports to Europe. Another point is consumption: despite rising real incomes, household consumption remains subdued.
Why is that?
It comes down to a certain lack of confidence in the future. Currently, unemployment is low, and the labour market is stable. But many households fear that, without fiscal consolidation, higher taxes may be on the horizon. That’s perhaps why consumption has been below what we expected.
Nevertheless, are the markets correct in their assessment?
Markets are not always wrong – but they’re not always right either. No one can predict the future with certainty. Markets tend to react with volatility; a central bank, however, cannot be volatile. That’s why we need to act with caution. And that’s exactly what we’re doing.
Is there a consensus of opinion on this within the Governing Council?
Thursday’s decision was unanimous. The ECB’s Governing Council consists of 26 members with different perspectives – but we all agree that we must keep all options open. If the situation changes, we will adjust our stance accordingly. And to be completely honest: if you find someone who can predict the next six months with certainty, we should hire them immediately.
Let’s talk about the blockchain revolution and digital money – areas where Europe risks falling behind once again. Will we see stablecoins in Europe or will we remain limited to the digital euro?
Stablecoins and the digital euro are not mutually exclusive. We’re not developing a digital euro because of stablecoins, but as a digital evolution of central bank money. The goal is a unified digital currency for Europe – like a banknote, but stored on a smartphone instead of in a wallet. This means it can also be used for e-commerce payments, where cash plays no role.
The decision on the digital euro will not come until 2026 or 2027 – but by then, it could be too late, as the tokenised world may already be dominated on the blockchain by the US dollar.
Europe should not be behind on this, but we first need a legal framework. I regret that the European Parliament won’t make its decision until May next year. As soon as the regulation is in place, the ECB is ready to swiftly introduce the digital euro. However, the time factor isn’t the only priority – the system must also be secure and stable. That’s what we are working on intensively.
What if a major stablecoin were to collapse tomorrow – would Europe be prepared for the consequences?
Stablecoins do not currently play a central role in Europe, and their market size is limited. Nevertheless, questions of financial stability do arise – particularly in the United States, where stablecoins are growing much more rapidly and are sometimes tied to bond portfolios. We need to monitor these developments on an international level. The stablecoin market is global, so regulation must also take a global approach. We need a coordinated legal framework and close cooperation between institutions to close regulatory gaps and create a level playing field.
If we talk again in ten years, what will we be discussing? Will everything be fine, with artificial intelligence and stable inflation, or will we be looking at a completely different Europe where the euro area might even be a thing of the past?
If you’re asking me on a personal level, I’d be very happy if Atlético Madrid finally won the Champions League! But on a serious note: I’ve spent many years working with the Eurogroup, the ECOFIN Council and now the ECB; I have been, and continue to be, part of this European community. My greatest wish is that populist movements in Europe do not prevail. That the European spirit remains strong enough to secure a united and stable Europe. And that we do everything in our power to make this goal a reality.
