UniCredit CEO says Europe may defy the odds and avoid a recession

Recent information points suggest the euro portion whitethorn defy the likelihood and debar a recession, according to Andrea Orcel, CEO of Italian slope UniCredit.

Euro portion header ostentation came successful astatine 9.2% year-on-year successful December, marking a 2nd consecutive period of diminution from October's grounds precocious of 10.7%, but remaining good supra the European Central Bank's 2% target.

Soaring nutrient and vigor costs successful the aftermath of Russia's penetration of Ukraine successful February 2022 exerted immense unit connected the euro portion system and prompted the ECB to embark connected a bid of steep involvement complaint hikes successful the anticipation of getting ostentation nether control.

However, a mild wintertime has reduced the hazard of a state shortage and softened vigor prices, portion user assurance and concern expectations crossed the 20-member currency bloc person improved successful caller months.

Meanwhile Germany, Europe's largest economy, stagnated alternatively than contracting arsenic wide expected successful the 4th quarter.

A caller upturn successful economical information has prompted immoderate economists implicit the past week to upgrade their forecasts for the euro zone and beyond.

"Our presumption was a mild recession for this twelvemonth but since past if we look astatine each the indicators we see, we astir apt spot hazard connected the upside, truthful we're looking astatine thing that could adjacent beryllium nary recession," Orcel told CNBC astatine the World Economic Forum successful Davos, Switzerland.

He added that determination are inactive "significant risks" to the groundswell of cautious optimism.

"We don't truly cognize however the warfare is mapping out, determination is ever a lag successful the interaction from raising rates and truthful we don't truly cognize precisely however the accelerated complaint emergence volition interaction the system and determination is astir apt 1 of the biggest shifts successful worth chains and successful geopolitics that we person seen since World War II," helium said.

The ECB is expected to instrumentality different 50 ground constituent hike to involvement rates, taking its cardinal complaint from 2% to 2.5%. ECB committee subordinate and Bank of Portugal Governor Mario Centeno told CNBC connected Tuesday that "at least" a fewer much complaint hikes volition beryllium connected the cards successful 2023.

Orcel acknowledged that the ECB has a "very hard job" arsenic it looks to tackle ostentation by raising rates, which immoderate economists caution volition further wounded growth.

"Europe has a antithetic benignant of ostentation from the 1 successful the U.S., it is mostly proviso driven connected energy, connected food, and truthful what they're trying to bash to tackle ostentation is to jam down the remainder of the request but evidently that has a disproportionate interaction on, let's telephone it, the system distant from those commodities," Orcel said.

"Given the lag effect and everything other and the information that the European system is rather sticky and past gives, we were acrophobic that if you tighten substantially supra 2%, it could person undesirable effects later."