ECB’s Rehn Says Brexit Poses Biggest Short-Term Risk

(Bloomberg) -- The possible Brexit fallout poses the biggest short-term danger for the economy and financial markets appear to “underestimate the risk,” European Central Bank Governing Council member Olli Rehn said in an interview with Die Welt published on Monday.

The central bank must ensure there is “no bigger turbulence” even if the U.K. does leave the European Union without a deal, Rehn told the German newspaper, adding he hopes the no-deal Brexit scenario will not take place.

The ECB has protectively entered into so-called swap line agreements with the Bank of England to safeguard sufficient supply of euros and British pounds to financial institutions, he said.

Rehn said economic growth in the euro zone “has weakened significantly” and offers reasons for concerns. The main cause is uncertainty within and outside the euro zone, particularly the trade dispute between the U.S. and China, he said.

A review of the ECB’s strategy Rehn has suggested would be “definitely no revolution, but rather an evolution” to reflect broader changes like an aging population and the effects of digitalization, he said. Price stability would remain the top priority and the ECB’s mandate shouldn’t be questioned, Rehn said.

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