Bloomberg News: SocGen Chairman Warns a Hard Brexit Risks a Global Recession

Article by Lucca De Paoli in Bloomberg News

Societe Generale’s chairman has warned that a hard Brexit could plunge the world into recession and would be a disaster for the financial system.

“This uncertainty, I think, would create quite an impact on the emotion, on the sentiment, on entrepreneurs all over the world,” said Lorenzo Bini Smaghi, who was speaking at the Bloomberg Invest London conference on Monday. “Consumption would stop, investment would stop and we could have also a recession.”

“It is a systemic event,” he said.

Prospects for a Brexit deal faded after talks between the two sides stalled. U.K. Prime Minister Boris Johnson struck a defiant tone at the weekend, saying that the country will leave the European Union as planned on Oct. 31, regardless of whether the EU accepts his latest proposal. For their part, French President Emmanuel Macron and Irish Prime Minister Leo Varadkar both signaled they want progress by Friday, adding to a sense that time is running out for the two sides to come together.

“For the financial sector, it is a big risk because if we don’t have continuity, for the financial system it is a disaster,” he said. “An agreed Brexit would have an equivalence concept that would at least allow for a transition.”

He compared the potential disruption with the effect of the Lehman Brothers collapse in 2008.

“We have seen in the past when there are doubts and uncertainties, these financial shocks become real economy shocks,” he said.

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