Stability of the financial system in the eurozone remains fragile
A weakening economy, rapidly rising interest rates and geopolitical tensions: According to the European Central Bank (ECB), the outlook for the stability of the financial system in the eurozone remains fragile. "The weak economic outlook and the consequences of high inflation are weighing on the ability of people, companies and governments to service their debts", explained ECB Vice President Luis de Guindos on Wednesday at the presentation of the euro central bank's semi-annual Financial Stability Report.
It is therefore crucial to remain vigilant. The full impact of the tighter financing conditions on the real economy had not yet been felt.
The ECB has raised key interest rates ten times since summer 2022 in the fight against inflation. The deposit rate, which sets the trend on the financial market and which banks receive from the central bank for parking surplus funds, now stands at 4.00 percent. This is the highest level since the start of monetary union in 1999 and has already made loans considerably more expensive.
The consequences of the increased financing costs are already evident on the real estate markets, which are experiencing a downturn, explained the ECB. Home ownership is now less affordable due to the rise in mortgage interest rates. Real estate prices are falling. In commercial real estate, the fact that office space is now less in demand following the coronavirus pandemic is also making itself felt.
Given the increasing financing costs due to the ECB's rate hikes, the assessment of the financial system's stability within the Eurozone is under scrutiny. The ECB, recognizing this fragility, emphasized the need for continuous assessment and potential interventions to safeguard the financial system, as stated by President Christine Lagarde during a recent press conference.
Source: www.ntv.de
