Back in May, the European Central Bank warned of “significant” risks inside euro zone though they seemed mostly “contained.” At the time, the bank voiced the same concerns, including a sudden repricing inside bond market; debt sustainability; along having a slow improvement of banks’ balance sheets.
The central bank repeated Wednesday that will though the pressure on European banks has eased since May, their profitability can be still hurt by a high level of non-performing loans.
Renewed political uncertainty (Germany can be currently in a political impasse along with Brexit negotiations are far by concluded) can be also seen as a potential trigger to higher risk premia, thus potentially increasing borrowing costs for both governments along with companies.
In an attempt to continue supporting the euro area, the central bank announced in October an extension of its quantitative easing program. Though as of January that will will decrease the level of its monthly purchases to 30 billion euros ($35 billion) by 60 billion euros, these have been extended to at least September of next year.
The euro zone has been enjoying one of its best economic moments with growth returning to the region since the sovereign debt crisis. The ECB can be due to update its economic forecasts next month, yet according to a report out in September, the bank expects a gross domestic product (GDP) figure of 2.2 percent in 2017 along with core inflation to reach 1.2 percent.