A top European Central Bank official warned today against rising debt levels on the continent, where "contagion" from a struggling Italy "remains a possibility".
"In Europe we observe re-emerging debt sustainability concerns, both in the public and private sector," ECB Vice-President Luis de Guindos said in a Frankfurt speech.
With debts of 130% of annual economic output (GDP) - more than twice the notional EU limit - and a budget showdown with Brussels, "Italy is the most prominent case," he added.
Investors fear the impact of weak national finances in Rome on the country's banks, which hold large amounts of sovereign debt.
"Although contagion (from Italy to other countries) has been limited so far, it remains a possibility," de Guindos warned.
The recently-installed ECB deputy's warning matches concerns from the International Monetary Fund, which warned last week that interest rates on Italian government debt were at their highest level in four years.
"There is appreciable uncertainty, and contagion from future stress could be notable, especially for economies with weaker macroeconomic fundamentals and limited policy buffers," the Washington-based institution said.
Rome said today it would not substantially revise its budget proposal for 2019 after it was asked to redo its homework by the European Commission.
Beyond Italy, de Guindos highlighted risks stemming from financial firms other than banks.
"Now that the banking sector is shrinking and becoming more resilient, our radar is shifting to the non-bank financial sector, which is more lightly regulated," he said.
Investment funds in the euro zone were managing €12 trillion of assets by the end of 2017 - about 42% the size of banks' assets.
The non-bank sector "may harbour leverage and liquidity risks that could amplify any potential shock from a reassessment of risks in financial markets," de Guindos said.
Luis de Guindos also said that euro zone growth is merely returning to normal after an exceptional 2017 and the slowdown is primarily due to weaker external demand.