Banks, Economics, EU – Baltic States, Lithuania, Modern EU

"Asset purchases are already being gradually reduced and, at the moment, I don't see why we couldn't end it by the end of the year, as planned. As to interest rates, I think it's still too early to speculate. Our guidelines say we could start the discussion in the middle of next year so that we could make decisions in the fall, if they need to be made, of course," he said. 

Vasiliauskas said decisions on interest rates would be based on data of that time and on the future outlook, adding that the probability of decisions to be made in the fall of 2019 did not necessarily mean that interest rates would be raised.

The Governing Council member sees the so-called "trade wars" as posing the greatest risks to the euro area and the EU as a whole, saying that the growing possibility of a hard-Brexit would have a lesser impact on the monetary policy. 

"I'd describe Brexit as only one of international factors, along with other factors such as international trade restrictions, that might have an impact on the monetary policy," Vasiliauskas told BNS.

"In fact, Brexit isn't the key factor for the euro area. Trade wars are more important in terms of the overall weight. All the more so because Britain's latest figures show that its economy is developing despite forecasts about the difficulties it may face," he said.   

Vasiliauskas does not expect Turkey's economic problems to have any major impact on the euro area, but says things are much more difficult when it comes to the situation in Italy. 

"Turkey alone is unlikely to have much effect on the situation in the euro area, but if we had problems in other developing economies as well, then, of course, we should keep a closer eye," he said.

"The Italian factor is much bigger. Its economy is, for example, ten times larger than that of Greece, which caused a really big headache some time ago". 

Given the size of Italy's economy and its public debt, if the country found itself in a trouble, this would pose a serious challenge for the euro area, the Lithuanian central bank governor said.

"But I'm sure Italy itself understands this perfectly well. The proposals we are now receiving from Italy regarding next year's draft budget seem to indicate that their initial positions have softened. Everyone understands that we are all members of the same club," Vasiliauskas said.

Unlike in Greece's case, the ECB already has a procedure in place for dealing with a possible crisis in Italy, he noted.