24.Mar .2023 15:26

Eurozone leaders convene to discuss banking stability

Eurozone leaders convene to discuss banking stability
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The leaders of the Eurozone countries are meeting the head of the European Central Bank (ECB) Christine Lagarde on Friday to discuss the potential fallout of several major banks collapsing in the US and Switzerland.

Inflation, which rose to troubling highs following high government spending during the coronavirus pandemic as well as the Russian invasion of Ukraine, will also be high on the agenda.

The ECB president was expected to say that banks in the Eurozone — which includes 20 EU countries sharing the euro currency — are safe. She is also expected to face questions over the ECB's interest rate hikes, introduced to curb soaring inflation.

Why are Eurozone leaders worried?

Concern over the collapse of Silicon Valley Bank and Signature Bank earlier in the month was only made worse when the impact spread across the Atlantic, imperiling 167-year-old Swiss bank Credit Suisse. The bank had to be rescued with a buyout from rival UBS.

Turmoil in the banking sector comes after years of cheap money have been restricted by rising interest rates in the EU, as well as in the US.

Russia's full-scale invasion of Ukraine and the subsequent cutting off of gas supplies to Europe sent energy prices soaring, hitting households and industry across the EU.

Although inflation has begun to slowly come under control, and the bloc has avoided a technical recession, there are fears that a banking crisis could trigger a larger recession like the one seen after the banking crash of 2008, DW reports.