European entity’s Financial Stability Report warns of economy cooling, sees “more challenging” outlook for households and businesses
The European Central Bank (ECB) warned on Wednesday of an increase in economic risks and a deterioration in financial conditions in the euro area. High inflation paints a “challenging” picture for households and businesses and the European entity advises member states to ensure specific and targeted aid to support the most vulnerable sectors, without disrupting the ECB’s monetary policy.
High energy costs remain the main driver of inflation, as revealed by the ECB’s November Financial Stability Report. The cooling of the European economy is also increasing pressure on financial conditions and increasing risks. “Families and businesses are already feeling the impact,” warned ECB Vice President Luis de Guindos. “Our forecast is that a technical recession in the Eurozone is increasingly likely,” he added.
The body also notes an increase in corporate and government debt, which – together with the drop in income – worsens the economic outlook. The panorama is particularly complicated for the electro-intensive sectors due to the increase in production costs and the reduction in profit margins.
“Many governments have given tax breaks to businesses and households to reduce the impact of energy costs,” the report points out. However, these efforts, together with the high post-pandemic public debt, “raise risks to debt sustainability”. That is why the ECB emphasizes that support measures should be “temporary and targeted” at the most vulnerable.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
