European Central Bank unusually downbeat on eurozone’s stability
The ECB warns that global political shifts, including the new Trump administration in the US, may trigger sudden asset price volatility and flow reversals
Frankfurt — Financial stability risk is rising in the eurozone and concerns may re-emerge about some countries’ ability to sustain their debt, potentially raising pressure on the bloc’s weakest sovereigns, the European Central Bank (ECB) said on Thursday. In an unusually downbeat message, the ECB warned that global political shifts, including the new US administration, may trigger sudden asset price volatility and flow reversals, compounding existing vulnerabilities to rising interest rates and yields. "Higher political uncertainty may lead to more domestically focused, growth-hindering policy agendas," the ECB said in a regular stability review. "This, in turn, could delay much-needed fiscal and structural reforms and could, in a worst-case scenario, re-ignite pressures on more vulnerable sovereigns," it added. "In particular, concerns about debt sustainability might re-emerge despite relatively benign financial market conditions." The ECB warned that political events in advanced e...
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