ECB warns high rates are pushing economy towards fragility

‘Early signs of stress’ in banks

The European economy “remains fragile” as the continent’s banks face default rates and payment arrears are showing “early signs of stress”, the European Central Bank has warned.

In its biannual financial stability review, the central bank warned of three key headwinds to the continent's economy: the risk of macro-financial and geopolitical surprises, higher debt service costs and growing vulnerabilities in the real economy pushing down banks' asset quality. Luis de Guindos, vice president of the ECB, said: "While risks to financial stability may appear less acute, they remain elevated." Federal Reserve consensus set on keeping rates higher for longer He explained that as financial conditions have tightened to attempt to push inflation back to target, over-...