FRANKFURT, April 1 — Financial markets have not “priced in” the risk of a no-deal Brexit and could suffer turmoil if the “worst-case scenario” materialises, top European central bankers warned today.
The risk of Britain crashing out of the EU on April 12 is “something that we cannot neglect,” European Central Bank vice-president Luis de Guindos told European Parliament lawmakers in Brussels.
“Markets have not priced in the possibility of a no-deal scenario... just suppose that this worst-case scenario arrives, we have to be prepared,” he added.
European institutions and national governments “have taken actions... to minimise the potential impact” while “the private sector is more prepared... than it was only six months ago,” de Guindos said.
But with the eurozone economy slowing late last year and into the start of 2019, a disorderly Brexit “could be a sort of amplifier of the negative impacts and the downward trends” by undermining confidence still further, he said.
“Markets sometimes overshoot” in reacting to political events, de Guindos noted.
The former Spanish economy minister’s warning followed up a similar statement from Dutch central bank chief Klaas Knot.
“Markets haven’t priced in a hard Brexit,” he told German business daily Handelsblatt. “There could be significant repricing on markets and the pound would come under pressure” if it comes to pass.— AFP