Eurozone weighs Brexit amid ‘Little Britain’ warning
No acute crisis in Italy, stop asking for public money for banks
BRUSSELS, July 11, (Agencies): Eurozone finance ministers assessed on Monday the impact of the British decision to leave the EU, warning that the country risked becoming “Little Britain” in the aftermath.
At their first talks on Brexit since the June 23 referendum, ministers from the 19 countries that use the euro urged swift action on an issue that they said was causing problems across the European economy.
Austrian Finance Minister Hans Joerg Schelling welcomed news that Theresa May is set to be named Britain’s next prime minister but urged a “fast decision” on whether to hold new elections to avoid “uncertainty” in the markets.
Schelling also warned of the effect on Britain from its vote to end 40 years of membership of the European project.
“I think probably there will be a ‘Brexit-light’, so Scotland will not leave (the EU), probably Northern Ireland will stay in the union, and probably Great Britain becomes Little Britain,” he told reporters.
Jeroen Dijsselbloem, the Dutch finance minister who heads the Eurogroup of his 19 counterparts, made a similar call for haste after May looked set to replace Prime Minister David Cameron imminently.
“The sooner we can sort out — let me say it diplomatically — this problematic situation, the better,” Dijsselbloem told reporters.
“We look forward to working with whomever is coming out of this democratic process. And we will have to find solutions for the Brexit which has been causing a lot of problems, particularly for the UK but also for Europe.”
Cameron has left it to his successor to officially trigger Britain’s divorce from the EU and start talks on a future trade relationship, a process the rest of the bloc has urged London to do as quickly as possible.
European Commission economic affairs chief Pierre Moscovici confirmed that Brexit would be on the menu at the talks in Brussels.
“This is our first meeting since Brexit, we will exchange views and give first analyses of the impact of Brexit,” he said.
“The impact could be significant, we have to work to reduce it.”
Global markets have been volatile since the British referendum and the pound last week hit a 31-year low against the dollar, although it has since strengthened a little.
Meanwhile, Italy’s troubled banks do not represent an acute crisis and lenders should stop asking for public money to solve their problems, the leader of eurozone finance ministers said on Monday, reacting to Rome’s plans to back its banking sector with state aid.
Italy is in talks with the European Commission to allow public support for its weakest lenders, including Monte dei Paschi di Siena. State aid to banks is allowed by European Union rules only in exceptional circumstances, when “a serious disturbance” emerges in the economy.
But Eurogroup President Jeroen Dijsselbloem saw no “acute crisis” when speaking to reporters before a meeting of the group Eurogroup of eurozone finance ministers, which he chairs.
“There are issues of non-performing loans in Italian banks, but that’s not a new issue,” he said, dismissing calls to address the Italian banking sector crisis as a fallout of the market turmoil caused by Britain’s vote to quit the European Union on June 23.
Italy’s lenders have been struggling for months to unload 360 billion euros ($400 billion) of non-performing loans — about one third of the eurozone total. After the Brexit vote, Italian bank shares were the most hit in the eurozone, compounding heavy losses since the beginning of the year.
European finance ministers will not formally address the banking crisis in Italy and the application of EU bank rescue rules in their regular meetings on Monday and Tuesday in Brussels.
But the issue is likely to be raised informally. “If it is brought up, and I would imagine it would be, we need to give our opinion,” Malta’s finance minister, Edward Scicluna, told reporters before the meeting.
“The Italian government is working to prepare precautionary instruments that will be used only if necessary,” Italian Finance Minister Pier Carlo Padoan said.
Asked about a new European financial safety net for the banking sector, Dijsselbloem said that he would oppose banks’ new requests for public support.
“There have always been and there will always be bankers that say that need more public money to recapitalise the banks. I would resist very strongly,” he said.
“Problems in the banks need to be sorted out in the banks by the banks,” he added.
Bank of Italy’s Governor Ignazio Visco said on Friday that public money should be used to help Italy’s troubled banks in a financial system that was “full of risk”.
After EU states injected billions of euros to rescue their banks in the aftermath of the 2007-08 global financial crisis, the EU adopted new rules to reduce public support.
So-called bail-in provisions, in force since January, dictate losses on shareholders, bondholders and even depositors with more than 100,000 euros before failing banks can receive public support.