Europe’s Economic Slowdown May Last a ‘Bit Longer,’ Centeno Says

(Bloomberg) -- The slowdown in the European economy may last a little longer than previously expected after a build-up of political risks such as Brexit, Eurogroup President Mario Centeno said.

“We thought that some of the slowdown could be temporary, for example manufacturing in Germany,” Centeno said on Wednesday in an interview with Francine Lacqua at the World Economic Forum in Davos. “It looks like it’s going to last a little bit longer.”

The International Monetary Fund on Monday cut its forecast for the world economy, predicting it will grow at the weakest pace in three years in 2019. Among major economies, the deepest revision was for Germany, which the IMF now sees expanding 1.3 percent this year, down 0.6 percentage point from what it predicted in October.

“We all need to be a little bit worried about developments. Most of the risks that we have been accumulating in the last months are of a political origin,” Centeno said.

Centeno said he sees only a “very small probability” of a no-deal Brexit, adding that Europe is preparing for all possible scenarios.

“We need to avoid a no-deal scenario,” said Centeno, who is also Portugal’s finance minister. “It’s going to be quite negative, not only for the European Union, but especially for the U.K.”

Italy can be resilient to shocks if the government delivers what it promised in its budget, he said. While the very large banks in Italy are “O.K.,” the country’s small- to medium-sized banks are still going through an adjustment, according to Centeno.

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