Increased lending to eurozone governments and businesses has led to the financial crisis following the coronavirus crisis, which could lead to economic woes, the European Central Bank has warned.
Despite the recent economic downturn due to declining disease and the spread of vaccines, the ECB said on Wednesday at the end of the year twice a year economic analysis that the bloc is still far from safe.
Luis de Guindos, ECB vice-president, said: “We hope the economy and the economy return.” “However, there is a fact that the epidemic leaves a legacy of more debt and less money, which – if left unchecked – could lead to market disruption and economic strain or lead to a long-term recession.”
All eurozone debt has risen from 86% in 2019 to 100% last year, the ECB said, although it noted that this had been reduced by recent interest rates, which reduced the cost of repayment. All debts will remain high next year, with more than half of the 19 euro countries still holding more than 3 percent of GDP, according to the ECB.
“The risks to the debt crisis are seen to be much higher than the global financial crisis and the economic crisis in the euro area, although debt consolidation and risk-taking risks appear to be good because they continue to earn legal revenue in terms of prices and long term,” it said.
De Guindos says the ECB will continue to have “money” for governments, businesses and families and everyone to leave strengthening financial principles “should be gradual, should be very prudent” and in line with economic restructuring.
But he cautioned that if the euro’s economy returns to normal activity – which the ECB expects by mid-year – it is “very important for governments to put in place reliable financial incentives” to reduce debt levels.
Government debt and the full support of large corporations, such as the airline, could boost international debt, says the ECB, warning of “bankruptcy-institutional partnership”. He also said that public service loans were worth about 14% of GDP, but so far these commitments are worth 4% of GDP.
The amount of corporate debt was much higher in the most confiscated companies, the ECB said. 90% of debt-laden companies increased their debt from 220% before the epidemic to 270% at the end of last year.
Number of companies to be bankrupt in the eurozone it fell by a fifth last year, although there was economic collapse after the war. De Guindos said corruption would increase this year, but the size of each increase would depend on how quickly government assistance was removed.
The program of stock market has been affected by the shift in long-distance work and online shopping during the epidemic and the ECB has said retail prices should be scrapped, which threatens eurozone banks as the sector has 7% of its public debt.
Recognizing that the stock markets “showed some great excitement” even in the US stock market, which began earlier this year, the ECB said that “inflation raises questions about the visibility and volume of market capitalization”.
The central bank also noted a recent increase in the price of bitcoin had “covered the waterfalls of the past like ‘tulip mania’ and the South Sea Bubble in the 1600s and 1700s”. But even though it called the cryptocurrency currency “dangerous and speculative” it confirmed that “the financial risks seem small at the moment”.