Economics
ECB Warns of Financial Turbulence as Populism Adds to Risks
- Confidence drop possible if emerging-market downturn occurs
- Anti-reform parties’ gains could threaten debt sustainability
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The European Central Bank warned that risks of financial-market turmoil have increased amid slower growth in emerging economies, weak bank profitability and the rise of populist movements across the 19-nation euro region.
“A sharper-than-expected fall in Chinese growth could well lead to a synchronized downturn across other emerging-market economies, particularly commodity-exporting economies,” the ECB wrote in its twice-yearly Financial Stability Review published on Tuesday. “Under such a scenario, the financial systems of advanced economies may be challenged by a reduction in consumer and business confidence, and renewed financial-market volatility potentially intensified by sudden stops in or reversals of cross-border capital flows.”