The Vice President of the European Central Bank, Luis de Guindos, has said medium term risks to financial stability in the euro area have 'increased markedly.'

However, he said policy actions have prevented a health crisis becoming a systemic financial crisis. 

Mr de Guindos made his comments during an online seminar today hosted by the Institute of International and European Affairs. 

He said the response from governments to borrow in order to tackle the impact of the Corona virus was the correct one but "…the additional debt may give rise to debt sustainability issues in the future."

Mr de Guindos also raised concerns about the impact on the euro area banking sector.

He said profitability is expected to be lower due to an expected increase in losses on loans to both households and businesses.

The ECB deputy leader made no specific reference to Irish banks. 

He said the ECB expects the eurozone economy to shrink by 13% in the second three months of this year, a fall he described as 'enormous' and something he 'had never seen' in his life.

Mr de Guindos also said that in recent weeks, there was now a 'certain level of recovery'.

Forecasting what will happen in the rest of the year is still very uncertain, he added. 

He referred to a common joke in Spain that forecasting is very difficult when you refer to the future.