The European Central Bank (ECB) has already been able to expel much of the air it has been holding over the weekend. The institution chaired by Christine Lagarde hopes that the agreement by which UBS is made with Credit Suisse for 3,000 million Swiss francs (a similar amount in euros) will already be the definitive firewall that stops the financial turmoil in Europe. “I welcome the quick action and the decisions taken by the Swiss authorities. They are essential to restore orderly market conditions and guarantee financial stability,” Lagarde said in a statement released this Sunday by the Eurobank.
On Friday a black week closed for European banks on the Stock Markets. The financial institutions of the Old Continent were seized by the panic of investors, who left the sector en masse. The ten entities left more than 50,000 million euros. On average, the banks in the Eurostoxx index lost 13%, although many medium-sized banks fell by as much as 20% of their value. The bailout of the American Silicon Valley Bank, Signature Bank and First Republic Bank had spread fear. The Credit Suisse crash almost simultaneously sent him into a panic.
With the turbulence persisting, the ECB decided to intervene at the end of the week. On Thursday he chose to announce that he was continuing his plan against inflation and raising interest rates to 3.5%, and he supported the “solidity” and “resilience” of European financial institutions. Lagarde warned, however, that he had all the necessary instruments and liquidity to face a banking crisis. He did not give figures, in a clear message to the Swiss authorities that it was up to them to appease this crisis.
Switzerland, however, was sending signals that it was not managing the crisis. On Friday, UBS and Credit Suisse rejected the merger, which once again plunged the shares of the troubled entity and, with it, the rest of European banking. The Supervisory Board of the ECB, headed by the Italian Andrea Enria, met urgently and sent a message to the markets: European banks, he insisted, are solid and there are no signs of contagion. What’s more, the exposure to Credit Suisse was minimal. But the fear that the fuse lit by Switzerland would spread was still there, especially as long as the situation of the Swiss entity was not fully resolved.
That has happened this Sunday. And Lagarde’s reaction has not been long in coming. “The banking sector in the euro area is resilient, with strong capital and liquidity positions,” said the French company. And while the ECB expects markets to applaud the Swiss operation on Monday, it added: “In any case, our policy toolkit is fully equipped to provide liquidity support to the euro area financial system if necessary and to preserve the smooth transmission of monetary policy”.
Five Days agenda
The most important economic appointments of the day, with the keys and the context to understand their scope.
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