The European Central Bank should prepare in advance for a crisis scenario in the event of a military threat from Russia, said Gediminas Šimkus, a member of the ECB’s Governing Council and governor of the Central Bank of Lithuania, in an interview with Reuters, according to The Moscow Times.
He stated that inflation in the euro area is currently at target level, the economy has adapted to high volatility, and interest rates are almost neutral. However, geopolitical risks, mainly related to Russia, could quickly disrupt this balance. “We have neighbors in the east, and the risk from there is different – the threat of military aggression,” Šimkus emphasized.
He mentioned that the ECB needs to ensure the resilience of cash circulation and payment systems to extreme scenarios. In conditions of increased military risk, the population could suddenly increase their demand for cash, and the financial infrastructure must be prepared for such pressures. In addition, it is important for the regulatory authority to maintain the flexibility of monetary policy to respond quickly to potential shocks.
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