High level of “European riskâ€: What implications?
“European risk†is now certainly high, given the uncertainties over Brexit, Italian economic policy, the political situation in Germany, growth, etc. What implications should be expected from a high “European risk� Capital outflows from the euro zone; Weak share prices , a widening of credit spreads and a rise in the various risk premia in the euro zone; The fact that the euro’s exchange rate will not gain from the increase in the US external deficit and appreciate. The high level of European risk is good for the United States, which is able to easily finance its fiscal and external deficits, and whose equity market gains from the transfer of capital from the euro zone to the United States.