EU ON THE BRINK: Eurozone economies are FRAGILE amid huge risks to stability, warns ECB

Monetary policymakers struck a somber tone despite economic indicators pointing to the upside in recent weeks.

Governments across the bloc were urged to reform their economies to help stave off a return to the crisis seen in 2012, in the bank’s financial stability review.

The report said: “Overall, risks to financial stability stemming from financial markets remain significant, mainly owing to the possibility of a further repricing in global fixed income markets.”

The report added: “Underlying fiscal fundamentals remain fragile.”

In a separate speech, head of the ECB Mario Draghi struck a similar note of caution over the outlook for the block.

Markets have been speculating the ECB could soon start to scale back its support for the economy, by scaling back money-printing or raising interest rates.

But Mr Draghi said policymakers are set to continue along the same path.

He said: “There is no reason to deviate from the indications we have been consistently providing in the introductory statement to our press conferences.”

Eurozone economic data has been showing signs of improvement in recent weeks.

But it is thought fears over Italy’s banking sector could again flare up, as many lenders are still heavily burdened with bad loans.

At the same time, the next round of bailout cash for debt-laden Greece has still not been signed off by creditors.

Athens has a looming £6billion debt payment in July and the delay to the deal is creating worries of another crisis similar to 2015, when the deb-laden country almost crashed out of the eurozone.