Put bluntly, this threat could affect the banking system’s ability to deliver its core functions. The macro-financial environment The macro-financial environment for financial services firms in Ireland is changing. While the low interest rate environment remains in place, the prospect of a reversal in term premia and risk premia is prominent in discussions in international fora in relation to financial stability risks.
As a result, in recent several years, fiscal conditions have deteriorated rapidly. In Italy, fiscal deficit has become chronic as the government has been supplementing a decline in domestic industries’ external competitiveness with fiscal support. Against such a backdrop, with a bloat of government debt outstanding, the market has been concerned over weakening of the economy’s growth potential.