Brexit Vote Seen Limited Risk to Euro-Area Recovery, Draghi Saysby
ECB president says volatility to persist until referendum
Europe's biggest bank has warned referendum to weigh on euro
The threat to the euro-area’s economic recovery from the Brexit referendum is “limited,” but volatility in financial markets is likely to continue until the June 23 vote and possibly beyond, European Central Bank President Mario Draghi said on Thursday.
The ECB views British membership of the European Union as “mutually beneficial,” Draghi told a press conference in Frankfurt after policy makers for the 19-nation euro region kept their emergency policy settings unchanged.
“Certainly the discussion about this possibility has already produced some significant consequences on the markets,” for example a sharp drop in sterling, Draghi said. “We do expect a continuation of market volatility, certainly until the referendum -- I don’t want to speculate on the outcome of the referendum -- probably even after. Is it enough to endanger the economic recovery in the euro area? The assessment of our staff is that the risk of this happening is limited.”
Draghi’s reassurance comes amid warnings from currency forecasters at Bayerische Landesbank to Europe’s biggest bank HSBC Holdings Plc that the referendum will weigh on the euro as well as the pound. And markets look set to become even more choppy, with implied volatility against the euro surging to a seven-year high earlier this month. Polls suggest the outcome of the vote remains hard to call.
While a weaker euro could help revive the region’s economy, a British vote to quit the EU risks damaging trade within the bloc and encouraging other nations to renegotiate their own membership terms. The ECB is deploying unprecedented stimulus, including buying 80 billion euros ($90 billion) of assets a month, in a bid to revive inflation.