Europe Eyes Brexit Dangers as Concerns Mount Over Slowing Growth

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Finance ministers from Europe’s common-currency area discussed the bloc’s preparedness in case of a no-deal Brexit, amid mounting worries over tepid growth in the region’s economy.

“We are concerned by the slowdown in Germany and by the recession in Italy,” French Finance Minister Bruno Le Maire said ahead of a meeting with his counterparts in Bucharest. “I think that this current economic situation clearly proves that there is a need now for decisions.”

Le Maire called for the euro area to agree on a joint budget to help support convergence across the bloc and bolster the region in case of a sharp downturn. He said a decision should be made by June.

The euro-area economy has lost momentum amid rising trade protectionism and a slowdown in China dented foreign demand. Italy, the region’s third-largest economy, slipped into a recession and will barely grow this year, leading to tensions within the ruling populist coalition. Once the powerhouse of the region, Germany stagnated at the end of last year and the Bundesbank has given up on an imminent rebound.

Discussions about the strength of the bloc’s economy are taking place as the U.K. is still struggling to find a path to leave the European Union. The European Commission said it would brief ministers on Friday on its Brexit preparedness plans, while holding out hope a deal with the U.K. would soon be struck.

“Brexit is not formally on the agenda but it’s inevitable for us to discuss it given its implications,” Mario Centeno, the Portuguese finance minister who chairs the Eurogroup meetings, said. “We will be briefed by the commission on the preparedness for a no-deal scenario, something that everyone would like to avoid, but we need to be prepared.”

Trade, Brexit Slowdown

ECB Vice President Luis de Guindos warned earlier this week that Britain’s exit from the EU without a deal could amplify the downward trend in euro-area growth. Policy makers last month decided to delay rate increases beyond the end of this year and to offer new funding to banks in an attempt to shore up the economy. Their next meeting is on Wednesday.

Centeno insisted that the current weakness is not a crisis.

“This slowdown has pretty much to do with political uncertainty, regarding Brexit, regarding the trade tensions that we have been seeing in the last two years globally,” he said. “We need to fix those and that’s why I remain positive.”

--With assistance from Jana Randow, Nikos Chrysoloras and Piotr Skolimowski.

To contact the reporters on this story: Viktoria Dendrinou in Brussels at vdendrinou@bloomberg.net;Joao Lima in Lisbon at jlima1@bloomberg.net;Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Richard Bravo, Jana Randow

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