Luis de Guindos: Interview with Financial Times

11 May 2026

You’ve been in the eye of the storm as ECB Vice-President for the past eight years. Your term is expiring amid the second energy price shock in four years. Is history repeating itself?

The situation we had in 2021 and 2022 is very different from the one we have now. Back then, the surge in inflation was the consequence of a series of shocks: the pandemic, the bottlenecks linked to the reopening of the economy, and Russia’s invasion of Ukraine. At that time, fiscal and monetary policy were extremely expansionary. But today, interest rates are positive, we are in quantitative tightening mode, and we have reduced our balance sheet. And fiscal policy is in a totally different situation. We do have an energy shock now. But I don’t think the comparison with 2021-22 is the correct one.

When you say that the situation is different, do you mean that the inflation risk is lower than it was in 2021 and 2022?

Yes, I think so. With the benefit of hindsight, I think that we were late to act in 2021 and 2022. One reason was that we had too much of an academic discussion about the drivers of inflation – whether it was demand-driven or supply-driven. It is very difficult to find a conclusion to such a discussion. And it postponed the action a little bit. Academic discussions are good at university and in academic fora. But in central banking, you have to take decisions. It is of course important to have a good theoretical foundation for your decisions. But you should not delay them because of any sort of academic discussion.

After the ECB’s messaging in April, investors and economists are all but certain that there might be an interest rate increase in June. Departing Banque de France Governor François Villeroy de Galhau said that some of the communication reminded him of implicit forward guidance. Do you share that view?

I think that we have to wait before deciding on the next interest rate move. We need more clarity about the conflict in Iran. We will have new projections in June. Let’s see the data. My impression is that the data on growth over the coming weeks are not going to be good. Bear in mind that an energy shock is usually reflected in inflation indicators much more rapidly than in growth indicators. That’s why I would call for prudence: the impact on growth is going to become much more visible over the coming weeks. And we need additional clarity with respect to the conflict.

Based on what you know so far, would you say prudence implies not raising rates?

I have never tried to pre-empt the rate decision. The only thing I can do now, in the last three weeks as Vice-President of the ECB, is to argue for prudence. Let’s see the data over the coming weeks, let’s see the projections, let’s see what happens with the conflict. Even if we have a truce or a peace agreement soon, the conflict is going to leave a mark because some infrastructure has been destroyed. Another concern is consumer sentiment. We have seen a drop in key indicators already. Regardless of the concrete elements that push up energy prices, the impact on sentiment is something we have underestimated at times.

And that will probably translate into weaker demand and weaker growth.

I think so: it will mean weaker activity. That’s the reason behind my call for prudence.

Financial markets have largely taken the conflict in their stride so far...

Yes, and that is positive. The markets’ response has been quite calm. They have discounted a benign scenario in which the conflict will be short, without a recession. This is the case not just for equity markets but also for credit markets and fixed income, and even sovereign bond markets. This is positive because a big repricing in asset markets would have been very detrimental, amplifying the impact of the energy shock.

What is your interim assessment of second-round effects of rising energy prices since late February?

The wage tracker data so far indicate that the situation is stable. So far, we are not seeing any meaningful increase in wage claims. Inflation expectations have not been unsettling so far either, even if you look at the future curve of oil. Markets are discounting an increase in the short term, but expect prices to come back to close to the pre-conflict level afterwards.

But doesn’t the benign response of financial market create downside risk in a scenario where the conflict is not resolved quickly?

Potentially. But so far, most analysts think that it is going to be accomplished.

Trump has been suggesting that a resolution is imminent for several weeks now.

Well, the markets believe that he has an informed view about that and assume that the conflict is not going to be long and that a peace agreement will be reached. What’s going to be very important is the reopening of the Strait of Hormuz.

When you were recently asked about the toughest moment during your time at the ECB, you referred to 2019 and the deep divisions within the Governing Council over taking interest rates further into negative territory and restarting quantitative easing at the end of Mario Draghi’s term as ECB President. There were many external challenges including two wars, a pandemic, surging inflation and a trade war. So why did you choose to mention an internal issue at the ECB?

Because I pay a lot of attention to institutional elements, and I think that having a united Governing Council is very important.

Why do you think unity is crucial?

There are 27 of us on the Governing Council. People have different views, but having a big, public divide like in 2019 is quite detrimental to the institution, as it undermines public and internal trust. We continue to have different views. But at least there is a common understanding that we should try to be as united as possible.

How did President Lagarde achieve this?

The pre-condition for a high level of consensus is trying to look for it. If you don’t do that, you will not reach consensus. And President Lagarde is always trying to do this, while understanding perfectly well that there are different views. There are 27 smart people on the Governing Council and it’s normal to have some divergence. But the guiding principle of President Lagarde is to try to converge, and I think that’s important.

Other central banks have a more antagonistic tradition.

We are a central bank of a monetary union consisting of 21 different countries that are in different situations, which makes reaching a common view especially relevant. For a central bank of a single jurisdiction, it might be different.

Does this consensual style also come with downsides? In theory, decisions might be taken more slowly if you try to get everyone on board?

I don’t think it does. In 2021-22 we were a little bit late to act for different reasons, as I already explained. And if you occasionally have to act one month later to send the message that you are united, I think that is a price worth paying. But don’t get me wrong: I don’t think the April decision to keep rates unchanged is an example of such a trade-off.

How concerned are you about the risk of fiscal dominance in Europe?

My main concern is that fiscal space is quite limited in the euro area at a time when we need to increase defence spending, some countries are looking to put in place mitigation measures to address the energy price shock, and growth is set to decline. The combination of all these factors will lead to a deterioration of the fiscal position in many countries. Some have more space, whereas others are more constrained. Markets have been very quiet so far. But my view is that they will pay more attention at some point. Overlooking this risk would be a mistake. We cannot take it for granted that markets will always be as they are now. Another important constraint is the political situation in Europe. Some countries have difficulties passing a budget. That’s worrying.

Do you see a risk of a new government debt crisis?

No, I am referring to the possibility that yields increase and, simultaneously, spreads start to widen a little bit.

What would this mean for monetary policy?

The tightening might come from the markets. We have already seen some tightening through this channel. If you start having a bigger increase in yields, this will have a pervasive effect on financing conditions. And we have already seen a slight tightening of financing conditions in the bank lending survey.

How close has the ECB been to activating the Transmission Protection Instrument in the past?

We have never discussed activating the Transmission Protection Instrument.

Could it become relevant in some of the scenarios that you have just described?

The Transmission Protection Instrument and the conditions under which we could activate it are well defined. I don’t think we are going to get there.

How concerned are you about the economic situation in Germany? The biggest economy in the euro area hasn’t seen any meaningful growth for the past three years and now, despite the fiscal push, forecasts have again been revised downwards quite significantly.

Germany was being described as “the sick man of Europe” at the beginning of the century. Then, some years later, it started to outperform the rest of the euro area. But there are big challenges in Germany, including energy and having an export-oriented economy in the middle of deglobalisation. The German Government has to carry out a programme of reforms to address this. Even from a banking industry standpoint, some modernisation is going to be needed because Germany has a very fragmented banking industry. I think some kind of reform in that respect would be important.

So are you arguing in favour of consolidation in the German banking sector? Cross-border consolidation?

Well, we are in favour of cross-border consolidation. But sometimes you need domestic consolidation before you can have cross-border consolidation. I think that some restructuring is going to be needed.

What do you think about the German Government's opposition to UniCredit’s plans to buy Commerzbank?

The biggest problem with these kinds of national messages is that they undermine the credibility of the savings and investments union. It’s very difficult for governments to argue that they are in favour of the savings and investments union if they then say “Well, no, we are against this specific transaction.” But it’s not only relevant in this specific example, it’s happening everywhere. Governments are very similar in their temptation to intervene in private deals. But such moves go against the spirit of a single market.

So you think the UniCredit-Commerzbank deal should go ahead?

I think I have been clear enough. I would apply the general rulebook to this case. Our recommendation is to consider the euro area as a single jurisdiction with free flow of capital and equity, and common deposit insurance.

Why do you think cross-border consolidation in banking is a positive thing?

It is a positive thing because there are economies of scale. A real European big bank could compete with the American ones. Valuations could be much higher, and cheaper funding would also be a possibility. Banks would be more diversified.

Your home country, Spain, has seen several years of very high growth rates. How sustainable is this?

First of all, it’s important to realise that the countries that implemented reforms 10 to 15 years ago are the ones outperforming the rest of euro area right now. Look at Greece, Ireland, Portugal or indeed Spain. You could argue that there were some problems in terms of ownership and the imposition by the Troika, but the reality is that, at the end of the day, the reforms paid off.

In the case of Spain, I think the reforms implemented at the time – the restructuring of the savings banks and the labour market reform – are behind the recent good performance of its economy. And then there are tailwinds, in particular immigration. The population growth in Spain is really impressive. According to our calculations, more than 50% of the growth of the Spanish economy can be attributed to the migration-driven increase in the population. At the same time, there are also costs that need to be minimised.

What specifically?

The main cost, in my view, is the pressure on the rental market. Demand for rental housing has risen a lot, but regulation limits the supply. In economics, sometimes good intentions give rise to very negative consequences. So price limitations and tenant protections – be they excessive or just cosmetic – are restricting the supply of rental housing. There are clear cases where people with good jobs can’t afford to live in Madrid, Barcelona, the Canary Islands or the Balearics. They can’t afford to pay the rent. This is an issue that the Spanish Government will have to address. Another issue is that, when comparing Spain with the rest of Europe in terms of GDP per capita, the gap hasn’t narrowed. And the productivity of the Spanish economy is still low, which means wages cannot increase. This leads to a contradiction: GDP figures and employment figures are really good but, simultaneously, people’s perceptions are not.

Is there any central banking dogma you think future generations of central bankers should revisit?

A key message that I have always tried to convey to staff at the ECB is that we mustn’t live in an ivory tower. The world has changed. We central banks are not holy, pure souls dealing with price stability. We have to be more in touch with the reality of the world around us. Economic models are good and form the basis of all analysis, but judgement is equally important.