What the ECB Interest Rate Cut Means for Greece Amid Trade War

The recent 0.25% interest rate cut by the European Central Bank (ECB), effective as of April 17, 2025, is expected to bring positive effects to both the European and Greek economies. This comes amid heightened uncertainty due to the ongoing trade war. However, despite the need for a favorable monetary environment with low ECB rates to achieve high growth targets and address long-standing issues, the international landscape demands caution. The Governor of the Bank of Greece, Yiannis Stournaras, aligns more closely with the ‘doves’ within the ECB’s governing council, supporting conditional further monetary policy easing. Lower interest rates can boost labor productivity, an area where Greece struggles, encouraging investments in innovative technologies. While this monetary policy can stimulate growth, it also faces challenges from global tariffs and uncertainties that create an unfavorable climate for public and private investments. Greece aims to implement its massive €15 billion Public Investment Program successfully while navigating potential risks if the trade war escalates. For banks, the interest rate cut directly impacts credit expansion, enabling them to channel cheaper funds to consumers, thus funding consumption, investments, and ultimately growth. However, analysts warn that a possible slowdown or even a global recession could reduce loan demand and worsen liquidity conditions.