ECB Official Warns of Tariff-Induced Economic Slowdown

Yannis Stournaras, a key figure on the European Central Bank (ECB) Governing Council and Governor of the Bank of Greece, has issued a stark warning regarding the potential economic fallout from US President Donald Trump's expansive tariff policies. Speaking to the Financial Times, Stournaras highlighted the risk of a "negative demand shock" that could significantly dampen growth across the eurozone.

Implications for Inflation and Economic Stability

Stournaras expressed concerns that the anticipated slowdown might drive inflation rates below the ECB's target of 2%, especially in light of the already "modest" economic forecasts. This scenario poses a significant challenge to the region's economic stability and recovery efforts.

Global Uncertainty and Deflationary Pressures

Despite recent indications from the ECB about a possible pause in rate cuts, Stournaras emphasized that tariffs are inherently "deflationary." He pointed to the "unprecedented" levels of global uncertainty fueled by US trade policies, estimating that eurozone growth could suffer a reduction of up to one percentage point as a direct consequence.