European Central Bank (ECB) officials have issued warnings about the risks facing the eurozone economy, highlighting concerns over growth, inflation, trade tensions, and financial sector exposures. ECB Governing Council member Klaas Knot stated that near-term growth and inflation risks are to the downside, while the medium-term inflation outlook remains ambiguous and inflation dynamics could present considerable challenges. Knot also emphasized the need for a neutral monetary-policy stance. Fabio Panetta, ECB Executive Board member and Governor of the Bank of Italy, noted that previous rate cuts have left limited room for further reductions, even as the macroeconomic outlook remains weak. He stressed the importance of maintaining a pragmatic and flexible approach to monetary policy and warned that rising protectionism and trade tensions, particularly tariffs introduced by the United States, could subtract nearly one percentage point from global growth over two years and put 5% of global trade at risk. Panetta also cited the US's surplus in digital services and the ongoing disputes over goods trade. Panetta highlighted risks from the concentration of power among a few large global technology firms, low productivity, demographic challenges, and the vulnerability of Italy's economy to climate shocks. He noted that Italy's wages remain below 2000 levels, and that by 2040, the country could face 5 million fewer workers. Italy's GDP grew 0.3% in the first quarter of 2025, May inflation was 1.7%, and grocery prices rose 3.1% in May. The IMF also cited low productivity, demographic factors, and climate shocks as key risks to Italy's growth outlook. In the financial sector, the ECB is intensifying its scrutiny of banks' exposures to private markets due to concerns about the rapid growth of these asset classes and associated risks. The central bank is planning on-site probes and has signaled it will send letters to banks regarding their private market exposures. Panetta warned about reputational risks for banks involved with cryptocurrency assets, emphasizing that losses in crypto-asset services could harm customer confidence in the banking system. He referenced Intesa Sanpaolo's €1 million bitcoin test and Santander's early-stage stablecoin plans. Panetta called for careful oversight of crypto activities, stating that stablecoins are not suitable as means of payment without proper regulation, and argued that the digital euro project is a necessary response to ongoing technological transformation.