The European Central Bank (ECB) announced today that it believes that the slow pace of Covid-19 vaccination in some parts of the world could threaten financial stability, even though the economic recovery has already begun.
The current economic recovery, with boosted activity in eurozone businesses, “reduced many of our worst fears about financial scars and increased risk of default” as a result of Covid-19, the ECB said in its half-yearly report. for financial stability.
But “the dangers associated with the pandemic have not completely disappeared, mainly because vaccination progress remains slow in many parts of the world,” said Luis de Guidos, the ECB’s vice president, in the preamble to the report.
The virus continues to spread and the epidemic is re-igniting in Europe, with a new record of more than 52,000 new cases in Germany today, while France exceeded the limit of 20,000 yesterday, Tuesday.
Thus, with the disruptions in the labor market and demand, “the pandemic continues to be one of the main risks to future economic growth,” the ECB warns.
To complete the list of threats to the economy, the report highlights “pressures on the global supply chain and rising energy prices” which also pose a challenge to the “inflation outlook”, a measure on which the ECB bases its its monetary policy.
Another warning from the ECB: the “pockets of inflation” in some markets, which were formed due to the upgrade of assets in the financial and real estate sectors. These sectors are exposed to a risk of correction, while businesses and public finances show “higher debt levels” due to the pandemic.
These bubbles are paradoxically linked to the ECB’s policy of ample rather than expensive money over the years to support the activity, which the bank says it is monitoring closely.
Following the conclusion of the COP26 climate conference last week, the ECB calls for an end to “coordinated and timely action” on climate change, which reduces the risks to the financial system.
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Source From: Capital
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