Thursday, November 24, 2016

Economies at risk of “severe shock”, warns the ECB – Observer

The world’s economies are at risk of a "severe shock to confidence", and the financial markets may suffer a fix "abrupt", warns the European Central Bank (ECB) in the half-yearly report of Financial Stability, published this Thursday.

"it Is likely that there is more volatility in the short term and continues to be significant potential for a reverse sudden" in the relative tranquility that has been in the markets in recent months, ” writes the ECB. The monetary authority speaks on "geopolitical tensions high", and a "greater political uncertainty given the electoral calendar intense in large advanced economies" — are two factors that are able to do to re-ignite risk aversion at the global level and cause a "a serious shock to confidence".

After a year that was marked by the vote of the british by the Brexit, and the unexpected victory of Donald Trump in the USA, economists of the ECB are concerned about the risk that "political uncertainty higher can lead to public policies more focused on the domestic market", that is, the more protectionist, which will be negative for growth.

countries "more vulnerable" you can see again under pressure in the financial markets, because the ECB is concerned that these policies do so with the postponing of the much needed structural reforms and fiscal consolidation".

In the banking sector in particular, "there remain significant vulnerabilities", as the "prospects for profitability remain low, a little bit throughout the euro zone, in a climate of economic growth in miniature".

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