ECB warns: Rising trade conflicts endanger financial stability!

ECB warns: Rising trade conflicts endanger financial stability!

The European Central Bank (ECB) warned of serious threats to the stability of the financial system in the euro area in its semi-annual financial stability report published today, May 21, 2025. At a press conference in Frankfurt, ECB Vice President Luis de Guindos said that trade conflicts and geopolitical changes in particular are endangering the economic situation in Europe.

De Guindos stressed that uncertainty over trade policy has reached unprecedented levels. These uncertainties, combined with stretched valuations and low liquidity buffers, make financial markets vulnerable to sudden shocks. The stock markets are particularly vulnerable as they are susceptible to sudden corrections due to high prices and a concentration of risks.

Economic impact of customs policy

A key point concerns changes in US tariff policy, which are seen as part of a broader shift in the geopolitical environment. These changes could have far-reaching economic and financial implications for both companies and households in the euro area. The announcements of tariffs by US President Donald Trump led to turbulence on the markets at the beginning of April, although some tariffs have now been put on hold.

Despite a temporary calming of the financial markets, their stability remains fragile. A rapid deterioration in the economic outlook or a worsening of trade conflicts could lead to abrupt changes in sentiment among investors, the ECB warned. The risk of corporate insolvencies, especially in tariff-sensitive sectors, could also increase.

Budgetary challenges

In addition, the high level of debt in some euro countries significantly limits their budgetary scope for dealing with economic risks. De Guindos noted that planned increased defense spending could further strain these countries' fiscal positions. While the situation in Europe is currently described as calm, the ECB underlines the need to preserve the resilience of the financial system and maintain supervisory measures such as capital buffer requirements.

Furthermore, while real estate markets are showing signs of recovery, they also face significant uncertainty. The ECB sees a clearer line in assessing the current danger situation and appeals to everyone involved to remain vigilant.

Further details and a deeper analysis of the current situation can be found in Financial stability report from the Süddeutsche Zeitung and in the report of n-tv.