EU countries have become more vulnerable to negative shocks due to their failure to reduce their public debt, according to the European Central Bank (ECB), Report informs.

The combination of high debt levels and accommodative fiscal policy is keeping investors away. This, in turn, could lead to an even greater increase in borrowing and have a negative impact on financial stability, the regulator warned.

Structural problems remain the main obstacle to economic growth in the region. Signs of rising losses in commercial real estate are also a cause for concern, the ECB noted.