Let me be elaborate on these key risks and vulnerabilities: The main risks identified outside the euro area financial system include the possibility of: •  vulnerabilities being revealed in non-financial corporations’ balance sheets, because of high leverage, low profitability and tight financing conditions;  •  greater-than-expected household sector credit losses if unemployment rises by more than expected;  •  the surge of government indebtedness raising concerns about the sustainability of the public finances, as well as the crowding out of private investment; and  •  an adverse feed-back between the financial sector and public finances as a result of government financial system support measures, fiscal stimuli and weak economic activity. Within the euro area financial system, important risks include the possibility of: •  renewed financial strains and that the recent recovery of bank profitability will not prove durable;  •  vulnerabilities of financial institutions associated with concentrations of lending exposures to commercial property markets and to central and eastern European countries being unearthed; and  •  a setback for the recent recovery of financial markets, if macroeconomic outcomes fail to live up to optimistic expectations. All in all, the challenges facing the euro area banking sector in the period ahead call for caution in avoiding timing errors in disengaging from public support. In particular, exit decisions by governments will need to carefully balance the risks of exiting too early against those of exiting too late.
Yves Mersch: Opening of the New Face of the Euro Exhibition Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Opening of the New Face of the Euro Exhibition, Deutsche Bundesbank, Saarbrücken, 15 January 2014. *  *  *  Ladies and Gentlemen, Thank you all for coming here today to the opening of the ECB’s “New Face of the Euro” exhibition. And a special “thank you” to the Deutsche Bundesbank for hosting this event with the participation of the Banque de France. It feels very appropriate to be in a border city like Saarbrücken, at the heart of Europe, to open an exhibition like this, dedicated to our single currency. The people of this city, with its long and eventful history, must be among those who best understand the ambitious vision to bring the nations of Europe closer together. Indeed, it was through the creation of a common market for coal and steel between six European countries that the first real step was taken towards the establishment of the European Union as we know it today and that led to the creation of the euro 15 years ago. Today, the euro helps to unite 334 million people in 18 different countries. Allow me to say a brief word about the exhibition you have come to see. “The New Face of the Euro” is a travelling exhibition which has already been to a number of cities in the euro area.