Central banks

The fear of “Brexit-Crash”

No matter how the decision goes down: After the Brexit Referendum, it could go in the financial markets are stormy. The Central banks want to do all in our power to prevent a “black Friday”.

The popular vote of the British on a possible exit from the European Union keeps the world in breath – the international economy is shaking the result. The fastest reaction is expected to come on Friday morning from the financial markets. And could solid be:, Many experts predict large fluctuations in price, some are even warning of a Crash. Star investor George Soros is afraid of a “black Friday”.

The most powerful Central bankers of the world have done already, to prevent, in the case of the cases, the worst.

The vote was the “biggest immediate risk for the financial markets in the UK and possibly even worldwide,” the Bank of England (BoE). As the head of the European Central Bank (ECB) sees it: A Brexit would have unforeseeable consequences. The ECB has prepared itself for this reason, “all possible contingencies”, assured President Mario Draghi recently before the EU Parliament. According to reports, the Finance Ministers of the G7 countries to design a policy for the Brexit case, the market turbulence to be avoided.

Risk Factor Pounds

Most experts agree that it Should come to Brexit, rushes the British pound in the cellar, because investors could withdraw their money in panic from the UK. “The capital outflows are likely to be enormous,” said Samuel Tombs from the research Institute of Pantheon Macroeconomics.

A crash in the exchange rate up to 1.10 Euro, it would be expected, on the stock exchanges, it was downhill, and the prices of government bonds came to a Lurching. But it is also a vote for remaining in the EU could lead to distortions by pushing the pound abruptly to the top.

The worst scenario: The access for the British to foreign currencies dries up completely, because foreign banks are not more willing, against the tumbling pound foreign exchange. This would especially damage, which depend heavily on foreign trade – which in turn would make the economy as a whole fragile.

Model Of Financial Crisis

At the point, the Central banks come into play. Some of the world’s most important – including the ECB and the BoE have agreed a so-called Swap lines. This means: If necessary, the monetary authorities can swap in the blink of an eye billions in their respective currencies against each other and thereby possibly dried up the market between banks, to replace. The supply of the inhabitants of the own currency area, foreign exchange can be secured. Similarly, the Central bankers were exercised in the financial crisis.

A possible bailout to calm the markets after the Referendum would be not only for the British important. So as your economy is dependent on that of other countries, applies the Vice versa. And the pound would be weakened clear, for example, stairs in turn, the Euro. This, in turn, would weaken the export industry in the Euro-zone.

To prevent the pound the device into the Reel, are also more radical steps are also conceivable. So the monetary authorities could intervene directly in the market. The ECB could buy pound against self-printed euros and the exchange rate support. “It is conceivable that the ECB teams up with the BoE and other Central banks in order to limit the exchange rate movements or to calm down,” said Jonathan Loynes, an expert at the London research Institute Capital Economics.

In addition, the monetary authorities could increase to prevent long-term effects of existing monetary policy instruments. The ECB would have the possibility of reducing the already extremely low interest rates, or your billion-dollar bond-buying program.

Also, the British might be active. In the Brexit case, the BoE is likely to lower key interest rates “quite quickly in the direction of Zero to support the economy,” estimates Daniel Vernazza, UK chief economist at the Bank UniCredit. Currently the UK base rate is still at 0.5 percent.

Afraid of the Domino effect

However, a Problem could be improved by all of these measures are not of the world: A Brexit could strengthen on the financial markets fundamental doubts about the European cohesion countries like Greece, Spain and Portugal, the state financing more difficult.

As to weddings, the Euro-debt crisis, the interest rates, the need to pay for crisis-ridden countries ‘ bonds could fast, to the top. The ECB could therefore lead to, in extreme cases, even your so-called OMT program to use, so a targeted state to buy up the bonds of crisis-hit countries, says Jack Allen of Capital Economics. On Tuesday, the Federal constitutional court had approved this, subject to certain conditions. It would be the first Time that this would be launched in 2012, the Instrument actually used.