‘Bewildering!’ Barnier’s dismissal of UK finance expertise could HARM eurozone | City & Business | FinanceHeat Profit
It has been a turbulent 12 months for the union of 19 EU member states which have adopted the euro as their common currency with many of their zone’s biggest contributors embroiled in internal battles now making global headlines.
But behind closed doors concerns are being raised over EU rules and red tape as the zone continues to struggle 10-years after the 2018 financial crisis.
Express.co.uk spoke to a number of financial experts on what comes next for the Eurozone in 2018.
Will it be another year of economic doom and gloom, or are the bad times over?
Tim Focas, director of financial services think tank Parliament Street says that a decade after the financial crisis, Eurozone banks are still not strong enough to fund a new plan for European business from their own balance sheets.
Mr Focas says: “Post-2008 studies have clearly shown that Eurozone fledgling companies were over-reliant on bank debt funding compared with, for example, their American counterparts.
“The EU need global Investors with risk appetite to Invest, which makes Barnier’s continued failure to acknowledge London’s expertise at financing both listed and private equity even more bewildering,” he adds.
Earlier this week, Ignazio Visco, the Governor of the Bank of Italy, attacked the EU’s regulatory regime on Italy’s struggling banks for contributing to the crisis which engulfed the country this year.
Banks including the oldest bank in the world, Monte dei Paschi di Siena, as well as two regional banks in Veneto, and four small banks in central Italy, have veered towards collapse as a result of alleged poor management after being overwhelmed by unpaid loans.
Speaking at a parliamentary tribunal Mr Visco slammed EU rules, saying: “These choices did not help to make the management of banking crises in our country more speedy or effective.”
Mr Focas agrees with the Italian, adding: “The problem with the rules, as they stand, is that they are far too convoluted.
“And true to form, the European Commission has applied them inconsistently. A much more simplified framework is needed.
“The trouble is that Italy is by no means the only EU country with dodgy loans clogging up its banks’ balance sheets. Believe it or not, the toxic sub-prime mortgage loans that shook the finance sector almost a decade ago continue to weigh down on the European banking system”.
Worryingly, Mr Focas says that there is now considerable concern among politicians and financiers that a new banking meltdown could be triggered across the Eurozone in 2018.
However, while this provides an unwelcome distraction for the ECB and the various EU institutions, Mr Focas says that the UK’s current banking stability puts the UK Government in a strong position when Brexit negotiations start back up in the New Year.
Offering a contrasting viewpoint on the Eurozone’s fortunes, Steven Bell, Chief Economist at BMO Global Asset Management says: “Europe is enjoying a virtuous cycle of better growth, falling unemployment and improving government finances. Even the banks are healthier. Just a few years ago they were in a cycle of doom. The opposite is true today.
“For now, it’s good news in Europe”, he says.
Mr Bell adds that although there remain a number of political challenges – Germany is yet to form a government, Catalan is threatening to break away from the rest of Spain and March will see general elections in Italy – the political challenges over the last 12 months have been a tougher test and as far as the Markets are concerned, those tests have been passed successfully.
On Greece, the bellwether for Eurozone failure, Mr Bell adds: “Greece has been out of favour in recent years as the economy collapsed, but even here we are seeing recovery, with the first sustainable growth for a decade”.