BERLIN, Aug. 30 (Xinhua) -- An increasingly likely disorderly exit of the United Kingdom from the European Union (EU) could lead to a new financial crisis in Europe, German finance minister Olaf Scholz warned on Thursday.
Speaking during the ongoing "Handelsblatt" banking conference in Frankfurt, Scholz cautioned that it was still "difficult to say whether (a post-Brexit agreement) can be reached" before London crashes out of the bloc on March 29 2019. As a consequence, the minister recommended to business leaders to make the necessary preparations for a "disorderly Brexit" until it was too late.
Scholz' comments were made on the same day as EU chief Brexit negotiator Michel Barnier told the radio station "Deutschlandfunk" that companies urgently needed to draw up plans for the worst-case scenario.
In a further sign of growing concern that London and Brussels will fail to clinch a deal to govern their future relationship, representatives of both sides pushed back a deadline by which they hope to conclude corresponding negotiations from mid-October until mid-November.
The German finance minister told guests at the "Handelsblatt" conference that he had spent long nights strategizing with his French counterpart Bruno Le Maire to ensure that Berlin and Paris were prepared for all eventualities. A focal point of their discussions had hereby been placed on eliminating risks to the stability of the European banking system stemming from a potentially chaotic Brexit.
Germany and France are both advocating for members of the Eurozone to take more ambitious steps to complete the single currency area's banking union. Amongst others, the two countries have made vague proposals for the existing European Stability Mechanism (ESM) to be transformed into a permanent European Monetary Fund (EMF) to act as a supranational lender of last resort during financial crises.
Scholz admitted on Thursday that industrial policy directed to help shape the European banking sector had been neglected by governments during past years. "This did not serve the interests of our business location. As a consequence, I believe that it must gain a new importance in political considerations," he said.
Several financial industry representatives have complained that Berlin has so far done too little to actively lure British-based banks to relocate to Germany in the wake of Brexit. Nevertheless, Scholz expressed confidence that a large amount of the Euro-Clearing business now concentrated in London would begin to gradually shift to continental Europe, "including to Frankfurt".