It is important to closely monitor the developments regarding the Middle Eastt crisis due to their potential economic implications, Governor of Central Bank of Ireland Gabriel Makhlouf has said. In statements to the Press on Tuesday during a visit he paid Cyprus, he noted that the situation is a challenge not only for Cyprus but also for Europe and the world, adding that the European Central Bank (ECB) is closely monitoring the situation and pointed out that it is too early to draw conclusions.

Makhlouf who visited Cyprus at the invitation of Governor of the Central Bank of Cyprus (CBC) Constantinos Herodotou, met Tuesday in Nicosia with Cypriot Minister of Finance Makis Keravnos and the CBC Governor.

In his statements he highlighted the importance of closely monitoring the developments due to their potential economic implications.

“It is of course, firstly and most importantly, a human tragedy. But we are watching developments, very closely because they are bound to have economic implications for us to some extent. So that’s going to be an area of focus for us”, he said.

Asked about the potential impact of the Middle East crisis on the monetary policy of the ECB, Makhlouf, said that it is too early to determine the precise consequences. Central bank governors and policymakers are closely monitoring the situation to better understand its implications, he said. Makhlouf cautioned against drawing premature conclusions and urged patience, saying that the crisis is affecting economic activity to some extent, but the extent and nature of its impact remains uncertain.

“To some extend is bound to have an impact because it affects, it is clearly affecting economic activity one way or the other. But the question is, how much of that is going to happen and it doesn't necessarily automatically mean that it's going to have a significant effect”, he said.  

He also said that ECB is currently committed to its primary goal of returning inflation to its target levels. As he said, this focus has been central to the ECB's efforts over recent months and will persist into the future.

Replying to another question about the potential impact of the current crisis on the banking systems of Cyprus and Ireland, Governor of the Central Bank of Ireland, expressed confidence that the financial systems of both countries are much more resilient compared to past crises.

 He attributed this increased resilience to changes within the international regulatory system and the banking sector's individual efforts to enhance efficiency and effectiveness. While acknowledging that risks always exist, Makhlouf said that, at present, the financial systems are considerably more robust. He also noted that maintaining this resilience is crucial, adding that he did not see any imminent signs that could pose a significant challenge to the financial stability of the banking systems.

The Governor of the Central Bank of Ireland, said that during the visit to Cyprus, he engaged in discussions about the situation in Cyprus and the broader Eurozone. Makhlouf also said that he had the opportunity to meet with business representatives, engage with students from universities in Cyprus, and participate in discussions with the CBC Governor's senior team.

Additionally, he said that he and his Cypriot counterpart were making preparations to participate in the upcoming meeting of the governing Council of the European Central Bank (ECB) scheduled to be held in Athens on Thursday.

Cyprus' Minister of Finance, Makis Keravnos, who hosted the meeting with Makhlouf and Herodotou, said discussions encompassed a wide range of topics, including geopolitical developments, economic progress within the Eurozone, and an exchange of insights on the respective economies of Cyprus and Ireland.

 He added that they expressed their shared concerns about ongoing geopolitical developments and the crisis in Israel, hoping for swift resolutions that would benefit both their economies and societies, as well as the European Union (EU). In addition to these discussions, Keravnos said that they exchanged views on monetary policy and its associated developments.

CBC Governor Constantinos Herodotou, expressed his gratitude for the visit of Governor Gabriel Makhlouf to Cyprus. He noted that with his Irish counterpart they were actively exploring methods to formalize and enhance the technical cooperation between the Central Bank of Cyprus and the Central Bank of Ireland. This, as he said, was a positive outcome, reinforcing the strong working relationship between the two central bank Governors.