‘Economic recovery in the euro area remains weak by international standards’ – ECB’s FSR Report

FXStreet (Mumbai) – Systemic stress has remained low in the euro zone in the past six months, according to the latest Financial Stability Review of the European Central Bank (ECB) released on Thursday, but there still existing risks to financial stability in the bloc.

The Report noted, “despite a generally positive financial market sentiment, there have been repeated moments of tension in global financial markets,” the bank said in an accompanying press release. “Large banks have become less confident about their ability to make markets during periods of stress,”

“While the economic recovery in the euro area has been gaining momentum, it remains weak by international standards,”

Despite signs of an improving economy, the report said that “the risk of continuing low nominal growth remains a challenge to financial stability in the euro area.”

ECB also warned in the report, “Sovereign risks emanating from Greece, in particular, have increased sharply owing to heightened political uncertainty over the past six months, while the banking sector in Greece has witnessed substantial deposit outflows, a loss of access to the wholesale funding market and deteriorating asset quality,”

“Financial market reactions to the developments in Greece have been muted to date, but in the absence of a quick agreement on structural implementation needs, the risk of an upward adjustment of the risk premia demanded on vulnerable euro area sovereigns could materialize.”

Systemic stress has remained low in the euro zone in the past six months, according to the latest Financial Stability Review of the European Central Bank (ECB) released on Thursday, but there still existing risks to financial stability in the bloc.

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