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01 July 2016

Reuters: ECB calls for urgent roadmap on Britain's plans to leave EU

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Two of the European Central Bank's top policymakers pressed Britain to provide a clear-cut plan for leaving the European Union, to prevent more economic damage.

In what appeared to be co-ordinated statements, ECB chief economist Peter Praet and financial markets head Benoit Coeure both warned of the potential consequences of dragging out the Brexit negotiations.

"It is very important that we - central banks and all the public - get very quickly a sort of roadmap .... Whatever the outcome will be, there must be an orderly process."

No one knows when the British government will invoke Article 50 of the EU's Lisbon Treaty, which begins an automatic two-year exit process. And the candidates to become British prime minister appear to be in no rush to start that process.

For Britain, there is an advantage to delaying, if it can establish its negotiating position and make informal overtures to countries before the two-year begins. The rest of the EU fears prolonging the uncertainty will do more damage to their economies and weaken their position in talks.

Praet said that while some politicians might hope to gain at Britain's expense, a bigger risk was an increase in red tape, damaging business efficiency and the long-run growth rate of the British and euro zone economies.

In London, Praet said the euro zone needed to complete its banking union, which is designed to provide more backstops for the financial sector and the public.

"What is the destination of the banking union," he said. "What are the next things to do – I think here about the deposit guarantee."

He appeared also to back the idea that governments might still need to use taxpayer money if the turmoil put unmanageable pressure on banks. Italian banks especially have been under strain this year, both from the Brexit vote and from worries about their financial health.

"It is urgent that we address these problems, and if necessary the flexibility of the Bank Recovery and Resolution Directive (BRRD) would have to be used."

Full article

Full speech by Peter Praet

Interview to Benoît Coeuré

© Reuters

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