Euro Area Stability Watch 2026
Global shocks, domestic shields: Resilience under strain
Highlights
Geopolitics dominate the risk outlook
77% of respondents of the ESM Sovereign Sentiment Survey mentioned geopolitics as a key risk
Spillover from US financial markets
46% of euro area GDP invested in US equity and debt securities
More price-sensitive investors in sovereign markets
27% holdings of euro area debt by foreign investors
Adverse scenario: GDP nears recession and inflation soars
0.1% average GDP growth in 2026–2027
High debt and rising spending pressures constrain policy choices
123% of GDP, euro area public debt in 2035 under the adverse scenario
Well-designed defence spending can reduce its fiscal cost up to:
53% of total spending in the long term
Press release and press conference
Foreword
