20 November 2024

• Economic growth remains fragile, while concerns about global trade outlook add to geopolitical and policy uncertainty
• High valuations and risk concentration make markets more susceptible to sudden corrections
• Policy uncertainty, weak fiscal fundamentals in some countries and sluggish potential growth raise concerns about sovereign debt sustainability
• Credit risk vulnerabilities in some euro area households and firms could lead to weaker asset quality for banks and non-bank financial intermediaries if downside risks to growth materialise

The European Central Bank (ECB) sees elevated financial stability vulnerabilities in a volatile environment, according to its November 2024 Financial Stability Review, which was published today. Risks to euro area economic growth have shifted to the downside as inflation has moved closer to 2%, while financial markets have experienced several pronounced but short-lived spikes in volatility in recent months. “The outlook for…