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ECB Vice President Weighs Risks of Using Frozen Assets for Ukraine's Reconstruction

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Shivani Chauhan
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ECB Vice President Weighs Risks of Using Frozen Assets for Ukraine's Reconstruction

In recent remarks, European Central Bank (ECB) Vice President Luis de Guindos emphasized that the reputational risks of utilizing frozen assets for Ukraine's reconstruction outweigh any potential benefits. These comments, made during interviews with De Standaard and La Libre Belgique newspapers, surface amid ongoing debates over the use of dividends and interest derived from assets frozen due to sanctions imposed on Russia.

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(Also Read: Zelenskiy Urges Rapid Expansion of Ukraine’s Defenses Amid Russian Invasion)

Sanctions and Frozen Assets

Following Russia's invasion of Ukraine, the western world, including the United States and the European Union, introduced or substantially expanded sanctions. These sanctions targeted Russian President Vladimir Putin, other government officials, and the general Russian population. Notably, they included asset freezes on the Russian Central Bank, which holds a significant 630 billion in foreign exchange reserves. The move prompted various multinational companies to disengage from Russia to comply with sanctions and home state-imposed trade restrictions.

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ECB's Stance and Economic Implications

The ECB's stance comes as lending to euro-area businesses fell for the first time in eight years, signifying that steep ECB interest-rate hikes are impacting the economy. The 20-nation bloc's demand has been heavily hit by consecutive rate increases, and monetary aggregates now reflect a softer demand for credit and increased interest in savings. Both the US Federal Reserve and the ECB have indicated their intent to roll back quantitative easing by reducing bond holdings. The question that remains is whether the ensuing financial stability justifies the risks, particularly fiscal risks in the eurozone, where there is no single fiscal authority or euro-denominated safe asset.

(Also Read: Murder in Tokyo, Poisoning in Ukraine, Tensions in Russia: A Global Roundup)

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Global Financial and Geopolitical Updates

In other global developments, Amazon has launched an AI chatbot, the U.S. House is discussing investment curbs in the defense bill, and the cryptocurrency market is witnessing fluctuations. There's also a ceasefire in Gaza, implications of deepfake pornography are being explored, energy efficiency challenges are being faced for net-zero goals, and geopolitical tensions involving Ukraine continue to develop. As always, Bloomberg, a reliable source for business and financial information, connects decision-makers to a dynamic network of information, people, and ideas.

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