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Construction cranes in Hamburg's Hafencity: How sustainable are the sharp price increases?
Photo: Rupert Oberhäuser / imago images / Rupert Oberhäuser
The economic recovery in the euro area has also reduced the risks to the stability of the financial system.
This is what the European Central Bank (ECB) is assuming in a current report.
Many short-term, pandemic-related risks have been overcome.
"The risk of high corporate default rates and bank losses is significantly lower today than it was six months ago," said ECB Vice President Luis de Guindos on the occasion of the publication of the central bank's semi-annual report in Frankfurt. “However, the risks posed by the pandemic have not completely disappeared.” Tensions in global supply chains and the recent rise in energy prices slowed the upswing. Countries are also faced with the challenge of paying off the debts they had accumulated during the crisis.
There was still a threat of dangers, particularly on the housing market.
The risk of price corrections has increased in countries in which the valuations of residential real estate had already increased before the crisis, said the ECB.
"Housing markets in the eurozone have grown rapidly, with little evidence that credit standards have been tightened in response," said de Guindos.
Funds and insurers more willing to take risks again
The central bank points out that house prices in the euro area rose more rapidly in the second quarter than they had been since 2005. At the same time, there has even been a loosening of the standards for granting mortgage loans. The sharp rise in house prices of around seven percent remains "a cause for concern," warned the ECB. However, the banks in the euro zone are expecting slightly stricter standards for issuing corporate loans in the autumn quarter, as the latest ECB survey of 146 financial institutions shows.
In addition, according to the ECB, the risk of price corrections has increased in some real estate and financial markets. The monetary watchdogs see a higher risk appetite among non-banks such as mutual funds, insurers and pension funds: They would have further increased their exposure to lower-rated corporate bonds and could suffer significant credit losses if conditions in the corporate sector deteriorated, the monetary watchdogs warned.
Looking at the economy as a whole, the central bank now sees a significantly lower risk than six months ago that a large number of company bankruptcies will occur or banks will fall into the red.
"But the risks posed by the pandemic have not completely disappeared," said De Guindos.
At the same time, the central bank conceded that the negative effects of the low interest rate policy on financial institutions could "worsen over time".
Recently, more and more voices have been heard from the banking industry that the central banks should initiate a departure from their ultra-loose line in view of the strong inflation.
The central bank announced that companies in the euro area had many profits again with the economic recovery in the first half of the year.
This is one of the reasons why the level of bankruptcies remained below the pre-crisis level.
However, bankruptcies have increased in the areas particularly affected by the pandemic.
And their number could continue to increase.
Supply chain issues and the recent hike in energy prices could also pose challenges to the economic recovery and inflation outlook, it concluded.
apr / Reuters / dpa