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ECB Warns Europe Could Suffer from US-China Trade War

European Central Bank (ECB) board member Piero Cipollone has stated that interest rates in the eurozone have room to fall further as inflation moderates while warning that the US-China trade war could significantly impact the 20-member eurozone economy.

The ECB has lowered borrowing costs five times since June, with inflation concerns easing in favor of addressing growth issues. Investors anticipate at least three more rate cuts this year to support an economy still recovering from two years of stagnation. Cipollone noted that there remains scope to reduce rates further, although higher energy prices and global trade tensions complicate the bank’s decision-making process.

“While the overall fundamentals haven’t changed since December, I expect a gradual decline in rates to align with inflation targets,” Cipollone said, predicting inflation would return to 2% by the summer.

The primary concern, however, is the ongoing trade tension between the US and China, which Cipollone believes could hit Europe hard, even without direct trade barriers. He warned that if President Trump intensifies the trade conflict with China, Europe could be negatively affected. With China holding 35% of the world’s manufacturing capacity, any disruption in US-China trade could lead China to seek alternative markets, potentially flooding Europe with discounted goods, which would hinder growth and suppress prices.

Though the imposition of tariffs could hurt the US economy, Cipollone downplayed the impact of potential tariffs aimed at Europe. He suggested that firms could absorb some of the higher costs, while a weaker euro against the US dollar could mitigate the blow to the region.

Despite the risks, Cipollone expressed confidence that trade tensions would not lead to a recession. He noted resilience in key areas, such as the labor market, consumption, construction, and industry, which are showing signs of recovery after a prolonged downturn. While trade tensions could pressure inflation downward, other factors, particularly energy prices, are expected to push it back up, leaving risks to the ECB’s inflation target balanced.

Strained Household Finances: Eurostat Data Reveals Persistent Payment Delays Across Europe and in Cyprus

Improved Financial Resilience Amid Ongoing Strains

Over the past decade, Cypriot households have significantly increased their ability to manage debts—not only bank loans but also rent and utility bills. However, recent Eurostat data indicates that Cyprus continues to lag behind the European average when it comes to covering financial obligations on time.

Household Coping Strategies and the Limits of Payment Flexibility

While many families are managing their fixed expenses with relative ease, one in three Cypriots struggles to cover unexpected costs. This delicate balancing act highlights how routine payments such as mortgage installments, rent, and utility bills are met, but precariously so, with little room for unplanned financial shocks.

Breaking Down Payment Delays Across the European Union

Eurostat reports that nearly 9.2% of the EU population experienced delays with their housing loans, rent, utility bills, or installment payments in 2024. The situation is more acute among vulnerable groups: 17.2% of individuals in single-parent households with dependent children and 16.6% in households with two adults managing three or more dependents faced payment delays. In every EU nation, single-parent households exhibited higher delay rates compared to the overall population.

Cyprus in the Crosshairs: High Rates of Financial Delays

Although Cyprus recorded a notable 19.1 percentage point improvement from 2015 to 2024 in delays related to mortgages, rent, and utility bills, the island nation still ranks among the top five countries with the highest delay rates. As of 2024, 12.5% of the Cypriot population had outstanding housing loans or rent and overdue utility bills. In contrast, Greece tops the list with 42.8%, followed by Bulgaria (18.7%), Romania (15.3%), Spain (14.2%), and other EU members. Notably, 19 out of 27 EU countries reported delay rates below 10%, with Czech Republic (3.4%) and Netherlands (3.9%) leading the pack.

Selective Improvements and Emerging Concerns

Between 2015 and 2024, the overall EU population saw a 2.6 percentage point decline in payment delays. Despite this, certain countries experienced increases: Luxembourg (+3.3 percentage points), Spain (+2.5 percentage points), and Germany (+2.0 percentage points) saw a rise in payment delays, reflecting underlying economic pressures that continue to challenge financial stability.

Economic Insecurity and the Unprepared for Emergencies

Another critical indicator explored by Eurostat is the prevalence of economic insecurity—the proportion of the population unable to handle unexpected financial expenses. In 2024, 30% of the EU population reported being unable to cover unforeseen costs, a modest improvement of 1.2 percentage points from 2023 and a significant 7.4 percentage point drop compared to a decade ago. In Cyprus, while 34.8% still report difficulty handling emergencies, this marks a drastic improvement from 2015, when the figure stood at 60.5%.

A Broader EU Perspective

Importantly, no EU country in 2024 had more than half of its population facing economic insecurity—a notable improvement from 2015, when over 50% of the population in nine countries reported such challenges. These figures underscore both progress and persistent vulnerabilities within European households, urging policymakers to consider targeted measures for enhancing financial resilience.

For further insights and detailed analysis, refer to the original reports on Philenews and Housing Loans.

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