Italy aims to accelerate fiscal tightening to exit the excessive deficit procedure earlier than expected, but high public debt, structural economic weaknesses and unfavourable demographics pose challenges to the medium-term outlook.

The consolidated non-performing loan (NPL) ratio of EU banks remained stable at a low level of 1.86% in the second quarter despite a rise in total NPLs to EUR 373.4bn, reflecting underlying volume growth.

Germany is facing severe demographic challenges with more acute structural pressures than other advanced economies. Labour-market and pension reforms are essential, but fragmented politics risks eroding the country’s competitiveness.

The US and global economies remain resilient ahead of forthcoming US elections. However, Europe’s economic fragility poses challenges for credit despite support from the easing of interest rates.

Türkiye’s restrictive monetary policy continues to drive disinflation, bolster external accounts and replenish official reserves, improving the country’s long-term credit outlook despite persistently high inflation and a wide budget deficit.

UniCredit is pursuing a growth strategy to create a pan-European banking leader, but political resistance to cross-border consolidation remains strong.

Mario Draghi has reminded European policy makers of the critical need to regain economic ground lost to the United States, but the gap is less wide than it first appears, with the challenges of resilience and productivity concentrated in southern Europe.

Spanish banks expect strong H2 results supported by higher-for longer interest rates and loan volumes recovering faster than expected. Asset quality continues to be strong so risks to profitability and organic capital generation are contained.

Political deadlock in Germany and France limits the prospect of implementing fundamental reforms proposed by the Draghi report, which, together with Southern Europe’s productivity gap, challenges Europe’s growth outlook.

Belgium’s next federal government could become better aligned with the provincial administrations in Wallonia and Flanders, improving the prospects for reducing the budget deficit and stabilising public debt.