Economists see financial market stability “currently not in jeopardy”

Economists see financial market stability “currently not in jeopardy”

DDespite the recent turbulence in the banking industry, economists are not expecting a new edition of the financial crisis from 2008. “The uncertainty on the financial markets has recently increased due to the closure of the Silicon Valley Bank and the takeover of Credit Suisse by UBS,” says the outlook published on Wednesday by the Council of Experts for the Assessment of Overall Economic Development. “Unlike in the global financial crisis, the difficulties of individual banks are not based on largely worthless financial products.”

In addition, neither the interbank market nor the supply of credit to the real economy are currently disrupted. “According to the assessment of the German Council of Economic Experts, the stability of the financial markets should not be at risk at the moment,” said the committee headed by Monika Schnitzer. The rapidly rising interest rates are a challenge for the financial system. However, with very few exceptions, the banks have a well-functioning liquidity management system and can cope well with rising interest rates.

Bundesbank boss Joachim Nagel had previously made a similar statement. He currently sees no risk of contagion in the euro zone’s “resilient” banking system. “We are not facing a repeat of the financial crisis of 2008,” said the head of the Bundesbank to the “Financial Times”. “We can handle it.” and the bankruptcy of the Californian Silicon Valley Bank are now becoming more cautious in lending. However, he does not currently fear a credit crunch. It is “too early” to come to this conclusion. A credit crunch is defined as insufficient lending to the real economy, which can severely affect the economy.

The German Council of Economic Experts has also updated its economic forecast: Unlike in their autumn forecast, the economists are now expecting slight economic growth of 0.2 percent. In addition, according to their forecast, inflation should be lower than expected at 6.6 percent, as can be seen from their report published on Wednesday. Especially because of the more stable energy supply, the outlook has brightened slightly. Overall, however, the situation remains tense.

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