Exclusive Conversation with Nikkei

Fabio Panetta, Member of the Executive Board of the ECB, discussed the current economic situation in the euro area. While there are signs of improvement, such as the rebound in the second half of the year and the deployment of Next Generation EU funds, the recovery is still incomplete. Euro area GDP is still below its pre-pandemic level and millions of jobs lost during the pandemic have not been recovered. The economy still relies on monetary and fiscal policy support, and a premature withdrawal of policy support could suffocate the recovery. In terms of inflation, there is a transitory increase driven by rising commodity prices and statistical base effects, but underlying inflation remains low. Medium-term inflation is projected to remain subdued and well below the ECB’s 2% target. Panetta emphasized the need to continue policy support until inflation reaches the target. Regarding the possible introduction of a digital euro, Panetta highlighted two main reasons: the decline in cash usage and the need to prevent dominance by non-European players. A digital euro would protect privacy, increase consumer choice, and support the digitalization of the economy while ensuring sovereign money remains at the core of the financial system. Panetta also addressed the potential impact on the existing banking system and the need for restrictions or disincentives to prevent financial instability. The timeline for the introduction of a digital euro is uncertain, with a minimum of five years and the earliest possible date being 2026. The ECB wants to ensure that if a digital euro is issued, it is done correctly and does not generate instability.

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