ECB policy-setter says Brexit would hurt London
By Francois Murphy
VIENNA (Reuters) - London's financial sector would suffer from a Brexit and there is a clear economic case for Britain to stay in the European Union, a European Central Bank policymaker was quoted on Tuesday as saying.
Those campaigning for Britain to leave the EU say London could still retain dominance in trading the euro against other currencies.
But ECB Governing Council member Ewald Nowotny told Austrian newspaper Die Presse: "Economic considerations clearly argue in favour of British EU membership."
Hinting that any future deal for Britain would be on less favourable terms than now, he added: "Should it come to Brexit, we will have to hold difficult exit negotiations.
"Then, on the side of European monetary policy, there would certainly be no reason to accommodate English wishes," said Nowotny, who is one of 19 euro zone central bank governors that decide ECB policy.
Opinion polls show the British 'in' and 'out' campaigns running neck and neck.
Euro zone central bank officials, speaking privately, have signalled that the ECB is determined to tackle an anomaly dating from 1999 when Britain opted out of the euro's launch: a dominant share of euro trading goes on outside its jurisdiction in London.
One of the biggest potential penalties would be the loss to London of the trade in trillions of euros in derivatives, one of the City's top money-spinners. The ECB will be pushing hard for the business to move onto its patch.
Nowotny, however, is the first to break his silence publicly on such issues ahead of the June 23 referendum.
The trading of euro-based securities spans trillions of euros of derivatives deals as well as the 'repo' market providing short-term funding for banks - 2 trillion euros (1.6 trillion pounds) of which experts say is based in London.
The Frankfurt-based ECB wants oversight of this business for a practical reason: if any disaster, like the 2008 collapse of Lehman Brothers bank in the United States, were to hit euro markets it would be responsible for dealing with the crisis.
Separately, Nowotny said that Europe could solve Greece's problems without involving the International Monetary Fund.
"The IMF is in itself no longer necessary economically for a stabilisation of Greece. It is a problem that the Europeans could solve on their own," he said.
"An explicit haircut is unlikely," he said, referring to the prospect of cutting the debt burden. "Greece has already made great progress."
(Reporting by Francois Murphy; Editing by John O'Donnell/Ruth Pitchford)
