Risks emerging from vulnerabilities or trends that may potentially contribute to macro-financial instability or disorderly corrections, are present in the majority of Member States, though their severity vary, the European Commission said Thursday.
The large and persistent current account surpluses and growing net foreign assets stock in states, especially Germany and the Netherlands, imply rising creditor risks and have potential relevance for the rest of the euro area, the executive arm of the European Union said in its annual “Alert Mechanism Report 2016”.
Meanwhile, Italy, France and Belgium were faced with “the combination of large stocks of public debt and a declining trend in potential growth or competitiveness”, which was a source of concerns despite the absence of external sustainability risks, the report said. The mix increases the likelihood of unstable debt-to-GDP trajectories and the vulnerability to adverse shocks, it added.
“Structural reforms aimed at unlocking growth potential must continue or be stepped up, in particular in countries of systemic relevance like Italy and France,” the report said.
“Such reforms would help not only to remove growth bottlenecks, but they would also contribute to support confidence on the sustainability of fiscal imbalances in these countries.”
Using a scoreboard of selected indicators, the AMR aims to identify and address imbalances that hinder the smooth functioning of the economies of Member States, the economy of the EU, and may jeopardise the proper functioning of the economic and monetary union.
An in-depth review will be conducted for the states identified in the AMR and the results are scheduled to be published in February.
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