The Strategist

ECB warns of risks due to high eurozone government debt

05/17/2024 - 03:03

The European Central Bank stated in its biannual Financial Stability Report that excessive levels of public debt make European nations susceptible to geopolitical and high interest rate threats.

According to the ECB, several EU nations have not yet finished implementing the stimulus plans meant to shield businesses and consumers from the effects of the energy crisis and the coronavirus pandemic.

"High debt burdens and loose fiscal policy" could deter investors, which would "further increase borrowing costs and adversely affect financial stability," according to the study.

The ECB also issued a warning about the dangers of more fiscal easing ahead of the elections that will take place in Germany, Austria, Belgium, and the European Parliament in the next two years.

The research stated that overall financial system risks have decreased recently, with levels of debt held by individuals and businesses returning to pre-pandemic levels.