A global commercial war, the volatility of the market and the high levels of debt are the three main risks faced by the euro area, the vice -president of the European Central Bank Luis De Guindos said on Thursday in a preview of the next financial stability report.
The economy of the euro area seems to feel good, despite the rates of the United States, which triggered the volatility of the market last month, but the block is still facing commercial barriers that could undermine growth, given its great dependence on trade.
The half -yearly analysis of financial stability of the ECB, scheduled for May 21, will also focus on how global agitation since the President of the United States Donald Trump has taken on the position could damage the euro area, said from Guindos.
“The risks for growth deriving from commercial tensions, combined with the increase in defense spending, can limit the tax space available to protect the economy from adverse shocks, facing structural challenges associated with climate change, digitalization and low productivity,” he said in a speech.
Although the equity markets have accumulated losses after the announcement of the rates in early April, they resumed and the assessments could be out of synchronization with possible risks.
“As the prizes for the risks of the share market, the credit spreads remain compressed and seem to be out of synchrony with very high levels of geopolitical and political uncertainty,” he said by Guindos.
“There is the risk that investors can underestimate the probability and impact of adverse scenarios”.
Commercial tensions will reverberate growth by reducing trust and, although there is a political solution, companies and families are likely to reduce caution expenditure, added to the Guindos.
Governments are likely to increase the expenses to bear growth and respect higher defense commitments, but the debt levels are already high and debt service costs can undermine public finances, even before states resolve other structural issues.
Source: Terra
Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.
