ECB identifies main threats to the eurozone economy

The European Central Bank has presented a new analysis of the main threats to the eurozone economy. Experts warn that despite the steady recovery of markets after the pandemic, new challenges require increased vigilance from all participants in the financial system.

Geopolitics and trade disputes push markets towards new risks

Economic uncertainty and the escalation of international conflicts are once again putting pressure on European markets. In particular, in spring 2025, after the US introduced new import tariffs, financial markets reacted with a decline: the EURO STOXX 50 index fell by more than 8%, but the situation stabilized after a temporary «pause» in tariffs.

In an environment where Europe is deeply integrated into the global economy, many companies have become vulnerable to rising costs and reduced export revenues. The ECB notes that this could lead to increased credit risks for banks and other financial institutions.

Among the main threats that analysts highlight are:

• The rise of tariffs and new trade barriers
• Increased volatility in financial markets
• Decline in export revenues for companies
• Higher production costs in eurozone countries
• Greater likelihood of defaults among corporate borrowers

Such challenges can put extra pressure on the financial sector and may trigger a wave of sell-offs on the markets.

Investor strategies shift with changing market behavior

In 2025, investors’ preferences are changing noticeably. Traditional safe-haven assets—such as the US dollar and US Treasuries—are losing popularity. There is a sharp rise in interest in gold and cryptocurrencies, leading to unusual market movements and heightened volatility: in April, the VIX index reached 35 points, which is much higher than the average of recent years.

The ECB emphasizes that investors are increasingly ignoring warnings about possible negative scenarios and are underestimating the risk of sudden corrections. Such behavior could lead to unexpected shocks in global financial markets.

Eurozone budget risks move to the forefront

Growing pressure on eurozone government budgets is associated with increased spending on defense and infrastructure. Debt burdens in the region remain high—about 85% of GDP. Even minor shocks can negatively affect the stability of financial systems.

ECB experts highlight the main consequences of rising budgetary risks:

• Higher costs of servicing public debt
• Rising yields on government bonds
• Deterioration of credit ratings for certain countries
• Risks for the sustainability of pension and social systems

All these factors may intensify the financial strain on countries and set the stage for new economic challenges.

Gold and cryptocurrencies become new indicators of market anxiety

Strong demand for gold and its price growth are among the signs of instability on the markets. Since the start of 2025, transactions in physical gold on exchanges have reached their highest levels in 17 years. Most asset managers are choosing gold as their main tool for protecting against risks linked to trade conflicts.

At the same time, activity on the gold derivatives market is increasing, with a significant share of deals happening over the counter. This makes the financial system less transparent and creates additional threats in the event of sharp price swings.

Interest in cryptocurrencies is also growing rapidly. In the eurozone, about 10% of households own crypto assets, and banks have increased their crypto operations by one and a half times in a year. The fast-growing capitalization of stablecoins makes this market vulnerable to liquidity crises and calls for stricter regulation.