According to the Financial Times, the European Central Bank’s executive board will meet on Tuesday to develop a strategy in case the British people vote for Brexit and how to avoid blowing the eurozone’s tentative economic recovery
According to the Financial Times, the ECB mainly worries for the long term effects of a Brexit, as it possesses some tools to address the immediate aftermath of the referendum; a British exit from the European Union would be the biggest economic setback the bloc has seen and it would trigger more disruptive moves.
“Anyone who thinks Brexit represents a bump in a road doesn’t understand the politics or the economics. It’s not a bump in the road, it’s a new road” said Robert Sapiro, chair Sonecon, a US consultancy on public policy.
Among the tools the ECB can and will use if needed, is a network of swap lines to deal with any shortages of euro liquidity, that can provide unlimited amounts of euros to banks –as long as lenders have collateral to back up loans.
However, the bigger concern for Mr Draghi, ECB President, who will explain his thinking before the European Parliament on Tuesday, is that a British exit would fuel Euroscepticism across the continent making it harder to push for more financial and fiscal integration necessary to make the euro more sustainable.