// EQUALITY: FINANCIAL STABILITY
Financial risks and geopolitical uncertainty
As economic uncertainty, geopolitical tensions and technological change test the world’s financial systems, strengthening international cooperation has never been more necessary
G lobal financial markets in 2025 exhibit high volatility and rising uncertainty due to risks coming from geopolitical instability and trade uncertainty (see figure 1). Geopolitical instability has affected risk premi- ums and asset prices at the global level, due to the deep interconnections in the financial system. After a few decades of deepening and widening international agreements on finance, trade and economics, 2025 has witnessed the destruction of them. History repeats, and we are reminded of what happened back in the fifth century when the Roman Empire collapsed. Ancient Romans were
traders and businessmen and cynically exploited their colonies to accumu- late wealth and knowledge, leaving them free to prosper and pay taxes to Rome. An empire needs a political class able to perpetuate and stabilise its power, not to disseminate destruc- tion. Historians agree that the Roman political class failed to accomplish these goals. After the collapse of the Roman Empire, geopolitical insta- bility increased, local governments limited the freedom of people and implemented economic policies that reduced global trade, also with price restrictions. The Middle Ages followed the collapse of the Roman era and are often depicted as dark, poor and dull. MOUNTING RISKS THREATEN GLOBAL MARKET STABILITY The introduction of unilateral trade restrictions in 2025 has rapidly destroyed the global trading system. Multilateralism has been replaced by bilateralism, with some countries lev- eraging their economic power to take advantage of their superior size. The adjustment to the trade restrictions among countries is uncoordinated and thus unable to guarantee a fair game with small losses. Public debt and deficits compared to gross domestic product have not diminished in G20 members. They vary from 234% in Japan to 24% in Türkiye. Sovereign risk has risen due to higher premiums, and cuts to public spend- ing are not popular – which further increases financial risks and volatility
Chiara Oldani, lecturer, monetary economics, Università degli Studi della Tuscia
FIGURE 1: DAILY TRADE UNCERTAINTY INDEX SEPTEMBER 2024 TO SEPTEMBER 2025
Source: Economic Policy Uncertainty Index. https://www.policyuncertainty.com.
50 // G20 SOUTH AFRICA: THE JOHANNESBURG SUMMIT 2025
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