VIENNA (dpa-AFX) - The European Central Bank considered the high borrowing costs faced by some euro area sovereigns was mainly driven by fears of a collapse of the euro and must be tackled through fiscal consolidation and structural reforms, according the bank's monthly bulletin, released Thursday.
'Exceptionally high risk premia are observed in government bond prices in several countries and financial fragmentation hinders the effective working of monetary policy,' the central bank said.
'Risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner,' it said.
According to the central bank, the risks surrounding the economic outlook for the euro area continue to be on the downside. They relate mainly to the tensions in several euro area financial markets, their potential spillover to real economy and possible renewed increases in energy prices over the medium term.
Copyright RTT News/dpa-AFX