Luis de Guindos: Interview in Corriere della Sera Interview with Mr Luis de Guindos, Vice-President of the European Central Bank, in Corriere della Sera, conducted by Mr Federico Fubini on 13 June 2019. * * *  The 5y5y forward inflation rate is at an all-time low and clearly below where it was when Mario Draghi first hinted at quantitative easing (QE) in 2014. The ECB has already done some more easing and President Draghi himself mentioned that there was an interesting discussion at the latest Governing Council meeting on different tools to do some more easing – the asset purchase programme (APP) and others. What do you need to see in order to decide to do more? What we need to see is a de-anchoring of inflation expectations. This has not yet happened, despite the fact that there has been a drop in market-based inflation expectations. If you look at the survey of professional forecasters, the situation is a little bit different – expectations have remained stable. Then we need to see if there is a significant additional drop in economic activity – a crystallisation of the downside risks that we have indicated. We can always try to look forwards to get an idea of what might happen, but ultimately the reality is the reality. And, well, let’s see what happens. But I think the important part of our stance is that we are totally ready to react. We will have time enough to know the future when it arrives.
It could grow and have a very clear purpose – countercyclical stabilisation. Now it’s more like a sort of competiveness instrument. We have to share more risk, for sure, if we want to improve the performance of the euro area and reduce the burden of monetary policy because, as I said, monetary policy is not almighty. And there is one element that is going to be key to achieving these steps: trust. You have to trust other countries to behave. But when a country misbehaves, as seems to be the case with Italy now, are you concerned that this may hamper trust? In the case of Italy, if you look at the fundamentals there are pros and cons. Italy is not a very vulnerable economy on financial grounds, if you take into account the net investment position and other factors. If you want an example of a vulnerable economy, look at Spain in 2010. It had an external deficit of 10% of GDP and a net investment position of 90% of GDP in the red. That’s not the situation Italy is in now. My point is that trust sometimes depends on the political intentions of the government. You mean the Italian government must provide some clearly stated objectives that are acceptable to the rest of the club. Yes, on both sides. This is a bilateral game, so it’s from both sides. And I think it’s very difficult to make progress if we can’t build trust.