(Bloomberg) -- Sovereign debt risk has replaced over-leveraged banks as a major driver of global uncertainty, with Italy posing the most pressing threat, Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said.
The European country’s size, along with the political havoc created by the recent formation of a populist-led government, have added to the risk, Blankfein said Tuesday in an interview at the Economic Club of New York. In their first two weeks in power, Italy’s new leaders sparked a dispute with France over immigration and threatened to scupper a landmark European Union trade pact with Canada.
Italy’s turmoil “and obviously immigration are the big risks to the whole construct of Europe at this point," said Blankfein, who was speaking with Bloomberg News Editor-in-Chief John Micklethwait.
Blankfein, whose bank weathered the 2008 financial crisis better than most Wall Street firms, said the risks from that period have simply moved onto government balance sheets.
“A lot of the leverage that was with the banks didn’t disappear from the world,” he said. “They migrated over to the sovereign.”
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