European Financial Stability Threatened by Geopolitical and Economic Risks

The Bundesbank and ECB warn of challenges from U.S. trade policies, weak growth, and commercial real estate pressures.

The Bundesbank and European Central Bank (ECB) have flagged significant risks to financial stability due to geopolitical tensions and economic uncertainty following Donald Trump’s U.S. presidential election victory.
Trump's proposed tariffs of 10-20% on European imports could exacerbate trade conflicts, impacting the export-driven economies of the Eurozone, particularly Germany.
The commercial real estate market remains under strain as the shift to remote work reduces demand for office spaces, with further price declines expected.
While the Eurozone banking sector has shown resilience after recent interest rate changes, vulnerabilities persist, particularly for smaller businesses and households if economic growth slows further.
High public debt levels in several Eurozone countries limit governments' ability to respond to potential economic shocks, raising concerns about long-term fiscal sustainability.