The ECB’s May 2020 Financial Stability Review suggests that the euro governments’ vast fiscal response to the pandemic could raise questions over their ability to repay debts, and could revive the threat of countries leaving the single currency.
“Should measures taken at the national or European level be deemed insufficient to preserve debt sustainability, the market assessment of redenomination risk might rise further,” the ECB said.
“Redenomination risk” refers to the danger of some countries quitting the euro or the single currency collapsing altogether.