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Madrid – The governor of the Bank of Spain, José Luis Escrivá, has highlighted the role that the euro can play at a time when the dollar, as an international reserve currency, “may be in question” because it “generates less credibility and less trust.”
In an interview on the television program ‘Las Mañanas de la 1’, reported by Europa Press, Escrivá referred to decisions, such as promoting the use of the dollar for the settlement of wholesale cryptocurrency and cryptoasset payments in the United States, which remain perplexing.
“All of this makes it likely that internationally there will be a need to strengthen the role of other currencies. And certainly, the euro has all the characteristics to play a more important role basically to provide confidence to the world with a reserve currency that really has financial stability behind it,” he added.
He also referred to the digital euro project, which the European Central Bank (ECB) and the Eurosystem have been working on for four years and which requires “very significant” investments. He explained that this digital euro would currently function similarly to banknotes and would be backed by the ECB with “everything that entails in terms of security and backing.”
Thus, he stated that the intention is for this digital currency to have the same characteristics and elements as a physical banknote, but to be found in a virtual wallet.
“It will be the digital equivalent of what a circulating banknote is today and will allow us to make payments across Europe digitally with all the confidence that a banknote gives you now, but to do it through digital instruments and different channels,” he emphasized.
Downward revision of Spain’s growth forecast
On the other hand, Escrivá announced that the institution will revise its economic forecasts downward due to the tariff policy of U.S. President Donald Trump.
“We will have to revise the growth forecasts downward. In the case of the Spanish economy, our last forecast was 2.7%, which is a high growth rate for the Spanish economy. The logical thing is to revise it downward, and what I cannot say at this moment, because we do not have it done yet and because it is not easy to do, is how much,” he stated.
The governor emphasized, however, that any revision of the forecasts “will be subject to very large elements of uncertainty,” as “there are elements for which there are really no sufficiently powerful analytical instruments to assess them.”
Escrivá assured that the institution is “monitoring very closely and directly” the situation, which he defined as “of extraordinary complexity from an economic and geopolitical point of view.”
“We know that what is happening has the potential to generate very negative effects on economic activity in the world in a very asymmetric way, but it is also true that we still do not have precise elements of how it will materialize and to what extent and with what temporal sequence,” he assured.
Escrivá stated that this “supply shock” generated by Trump with his policies is “very harsh” and has “the potential to generate strong declines in economic activity or slowdowns in those economies,” such as the Spanish one, which is growing at “relatively high” levels.
I would not speak of recession in any case, although there will be an impact
“But I would not speak of recession in any case, but rather that this will have some impact on economic activity,” Escrivá pointed out, also indicating that the counterbalancing measures being taken to counteract Trump “have the effect of raising prices.”
“These are the most evident elements, but there are more difficult elements to grasp that can make the situation more complex. On one hand, not only is there a tariff increase, but what may be in question is the functioning of the value chains and supply chains with which global production has been internationalized, and this can generate segmentations in trade and disruptions,” he emphasized.
This additional negative effect on global economic activity would come at a later stage and is difficult to assess, according to Escrivá, who added that beyond the direct effects generated by this situation, there is also a confidence effect.
“When markets and the sentiment of consumers and investors are affected by such disruptive situations, there is the potential for spending decisions to be retracted. And this can also happen with some delay. All of this makes it very difficult for us to put numbers on what impact this situation is having or will have on both economic activity and inflation,” he remarked. (April 9)