Halister News

(Bloomberg) -- ECB has limited options to strengthen EU cohesion so it would likely fall to politicians to act were Brexit to lead to a major crisis in the region, Berenberg analysts write in a report.

• If concerns about a domino effect rise, it could lead to faster progress toward a joint deposit insurance, the economists led by Holger Schmieding write
  • Some element of common financing with a “Eurobond light” for extraordinary govt spending for those countries who sign up to enhanced fiscal rules possible if a more forceful response becomes necessary
• German resistance to the ECB’s existing measures adds to the difficulties the central bank would encounter if financial markets begin to suggest the region’s cohesion is at risk
  • Expect the ECB to inject liquidity where needed and to state clearly it’s ready to act; in the event of a serious crisis, the ECB could and would act further
• Without a dramatic spike in tensions, the EU-27 leaders wouldn’t want to deepen integration on controversial issues
• It’s still too early to tell if the U.K. decision to leave the EU will help to contain the populist threat across the region
• Political risks loom large in the region but the risk that Brexit would trigger EU disintegration looks limited