ECB warns that the Euro zone economic is still fragile

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The financial stability of the euro area remains fragile. This was concluded by the European Central Bank on Wednesday in the Financial Stability Review in May.

Interconnection between countries, banks and companies can pose a threat to financial stability, according to the ECB.

A new coronavirus wave has slowed the recovery in the euro area and is weighing on the short-term economic outlook. According to the central bank, progress in vacination programmes and a gradual easing of coronavirus measures will support a recovery in the course of 2021.

However, certain sectors and countries have been disproportionately affected by the coronavirus pandemic, warns the central bank. A rising interest rate is a risk.

The ECB also pointed to the exuberant financial markets, which are pre-empting the expected economic recovery. Especially in the US, stock markets are already well above pre-corona levels, according to the central bank. This is even though it is only now that we are starting to carefully reverse state aid to companies. An increase in bankruptcies also affects households, the ECB warned.

The increased housing market also poses a risk to households.

On the positive side, while bank valuations in the euro area have improved, profitability remains a challenge and concerns about asset quality remain. Recent figures show that problems with the repayment of loans are growing again.

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Leah Kunze

Leah Kunze just graduated MBA and is proud of it. She is interested in automotive industry and innovations. She well be glad to receive a mail to [email protected]

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