Trade tensions combined with high debt pose risks to EU economy — Luis De Guindos

Luis de Guindos, the vice president of the European Central Bank (ECB), named three main risks to the eurozone economy. In his opinion, these are global trade tensions, financial market volatility, and high government debt.

The official said that US tariffs combined with increased defense spending could limit the fiscal ability to protect the EU economy from shocks and address structural problems.

Since the US announced tariffs in early April, equity markets have regained some ground. However, de Guindos suggests that investors may be underestimating the extent of uncertainty.

ECB's vice president adds that trade tensions will affect EU GDP growth through lower confidence. Even if the authorities manage to mitigate the situation, companies and households are likely to reduce spending as a precautionary measure.

Furthermore, according to de Guindos, the bloc's governments will boost spending to support economic growth and meet increased defense commitments. However, their debt levels are already high, and the additional costs of servicing it could negatively impact public finances.