ECB frets over politics and market shifts

Posted on November 24, 2016

The eurozone’s financial plumbing has proved resilient over the past six months, the European Central Bank says in its new financial stability review. But there’s a “but”. Several, in fact. Big ones.

“Compared with the previous assessment, the review sees the possibility of further asset price changes, triggered by political events in advanced economies, amid existing vulnerabilities in emerging markets,” the central bank says today.

In a nutshell, US politics are unpredictable, eurozone banks face “significant vulnerabilities” and European politicians could easily pull back from fiscal and structural reform. “In a worst-case scenario [that could] reignite pressures on more vulnerable sovereigns,” it says on the latter point.

A sobering thought.

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