The European Central Bank (ECB) has warned that debt ridden countries in the Eurozone risk bringing the single currency bloc to its knees.
Economists have warned that they most vulnerable economies across the EU who have soaring debt levels could “reignite pressure.”
Eurozone government budget deficits are set to rise by 8% of the GDP, with debt levels to soar above that of the 2008 financial crisis, and the bloc will see their worst recession since the Second World War.
The ECB review warned, “The pandemic represents a medium-term challenge to the sustainability of public finances.
“A more severe and prolonged economic contraction than envisaged would risk putting the public debt to GDP ratio on an unsustainable path.”
The ECB added, “The associated increase in public debt levels could also trigger a reassessment of sovereign risk by market participants and reignite pressures on more vulnerable sovereigns.”
ECB vice-president Luis de Guindos said, “The increase in public debt comes on top of already higher debt levels in some sovereigns.
“In the medium term we have to pay attention to the fiscal sustainability situation.”
Adding, “We hope that a fiscal response will not only come from national authorities, but that it will come as well from pan-European authorities.
“We hope that the decisions will be taken by the European Commission and the European Council will go in that direction.”