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Given the burden of government debt in the euro area, Bundesbank President Jens Weidmann has warned against EU reforms that could create new possibilities to take on debt. Instead, focus needs to be put on promoting the competitiveness and convergence of euro area countries, Mr Weidmann said. To achieve these objectives, a euro area budget could be a welcome advancement and refinement of the existing EU funds. That would not necessarily mean increasing the overall size of fiscal transfers.

German credit institutions are sufficiently capitalised to deal with potential losses from their residential mortgage exposures that could arise if house prices, which have been rising strongly since 2010, were to fall sharply. This is shown by the results of two current stress tests that have been developed by Bundesbank experts for risk analyses.

The International Monetary Fund reports that the German economy can look forward to the expansion continuing in the near term, but warns in its Article IV Consultation that external imbalances could cloud the upbeat outlook over the medium term.

The German Financial Stability Committee (FSC) considers the risks to the stability of the German financial system as a whole to be low at present. However, the favourable economic situation and low interest rates could induce market participants to underestimate risks, the FSC writes in its latest report to the German Bundestag.