EU Leaders Grapple with Bank Risks as Economy Weakens

European Central Bank President Christine Lagarde, left, speaks with Slovakia's Prime Minister Eduard Heger, center, and Cypriot President Nikos Christodoulides during a round table meeting at an EU summit in Brussels, Friday, March 24, 2023. (AP Photo/Geert Vanden Wijngaert)
European Central Bank President Christine Lagarde, left, speaks with Slovakia's Prime Minister Eduard Heger, center, and Cypriot President Nikos Christodoulides during a round table meeting at an EU summit in Brussels, Friday, March 24, 2023. (AP Photo/Geert Vanden Wijngaert)
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EU Leaders Grapple with Bank Risks as Economy Weakens

European Central Bank President Christine Lagarde, left, speaks with Slovakia's Prime Minister Eduard Heger, center, and Cypriot President Nikos Christodoulides during a round table meeting at an EU summit in Brussels, Friday, March 24, 2023. (AP Photo/Geert Vanden Wijngaert)
European Central Bank President Christine Lagarde, left, speaks with Slovakia's Prime Minister Eduard Heger, center, and Cypriot President Nikos Christodoulides during a round table meeting at an EU summit in Brussels, Friday, March 24, 2023. (AP Photo/Geert Vanden Wijngaert)

European Union leaders gathered Friday to gauge the risk of a banking crisis developing from recent global financial turbulence and hitting the economy even harder than the energy crunch tied to Russia's war in Ukraine.

The deliberations by EU government heads in Brussels follow US regulators shutting down two US banks, including Silicon Valley Bank, and a Swiss-orchestrated takeover of troubled lender Credit Suisse by rival UBS, The Associated Press said.

The emergency actions on both sides of the Atlantic revived memories of the 2008 global financial meltdown and the ensuing EU sovereign debt crisis, which almost broke apart the euro currency now shared by 20 European countries.

“For the moment, we see no reason to be worried,” Belgian Prime Minister Alexander De Croo told reporters on his way to the EU meeting. “But we monitor it really closely, almost on a daily basis, because no one knows what can happen.”

The European economy has been slowing rapidly since Russia invaded Ukraine 13 months ago to the day, leaving the EU flirting with recession. The war has fueled inflation by prompting cuts in supplies of previously abundant Russian oil, natural gas and coal and by denting consumer and business confidence.

The European Commission, the EU's executive arm, expects economic growth in the 27-nation bloc to slow to 0.8% this year from 3.5% in 2022 and 5.4% in 2021. A projected rebound in growth to 1.6% next year depends on a sound banking sector able to lend to businesses and consumers and protect deposits.

The EU has beefed up its regulation of financial institutions since the euro debt crisis, and little sign has emerged so far of broader contagion in Europe from Credit Suisse’s dramatic rescue.

Nonetheless, financial supervision in Europe remains a patchwork of EU and national authorities pursuing common approaches rather than heeding an actual single European rulebook.

For example, the euro area still lacks a common deposit insurance system, which is widely considered a key defense against future European bank crises. A stalemate among national capitals over how to share risk has left the bloc without this regulatory pillar.

On the market front, officials have said European banks generally have adequate cash buffers — while still urging vigilance.

“I am very confident in the amount of liquidity, the amount of resilience, that our banking system has built up,” said Paschal Donohoe, who leads the group of eurozone finance chiefs and is Ireland’s public expenditure minister. “But we can never be complacent.”

One reason for prudence is that the European Central Bank has raised interest rates from record lows, denting the balance sheets of lenders and making it more expensive for consumers and businesses to get loans. The ECB is seeking to bring stubbornly high euro-area inflation, which was 8.5% in February, closer to a 2% target.

ECB President Christine Lagarde and Donohoe are attending the EU summit to share their views about the economy.

“I’m really looking forward to the discussions with the president of the European Central Bank to understand where we are going and what tools they plan to use in the future — what are the prospects for our economy and inflation,” Estonian Prime Minister Kaja Kallas said.



Saudi, British Companies Seek to Explore Sustainable Partnerships

Participants in the Great Futures Initiative conference which was recently held in Riyadh (Asharq Al-Awsat)
Participants in the Great Futures Initiative conference which was recently held in Riyadh (Asharq Al-Awsat)
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Saudi, British Companies Seek to Explore Sustainable Partnerships

Participants in the Great Futures Initiative conference which was recently held in Riyadh (Asharq Al-Awsat)
Participants in the Great Futures Initiative conference which was recently held in Riyadh (Asharq Al-Awsat)

Several major national companies are participating in the UK-Saudi Sustainable Infrastructure Summit in London on June 24-26.

According to information made available to Asharq Al-Awsat, the Federation of Saudi Chambers is seeking to mobilize the largest possible number of companies specialized in sustainable infrastructure to explore partnerships with the United Kingdom in green construction, smart cities, and technologies.

The summit will address topics that touch on the importance of Saudi-British cooperation in developing and financing sustainable infrastructure and development of cities, in addition to green technology and renewable energy initiatives.

Trade Exchange

The event will be followed by a meeting of the sectoral working groups on June 25 and an evening celebration of the tenth anniversary of the British-Saudi Business Council. The Sports Investment Forum will be held on June 26.

The value of trade exchange between Saudi Arabia and Britain exceeded 17 billion pounds ($21 billion), while the two countries aim to increase the volume of bilateral trade to $37.5 billion by 2030.

In May, Riyadh hosted the Great Futures conference, one of the initiatives of the Saudi-British Strategic Partnership Council, which is chaired by Saudi Crown Prince Mohammed bin Salman and UK Prime Minister Rishi Sunak.

The conference sought to strengthen economic relations in several promising sectors, in addition to developing trade and mutual investment.

The two kingdoms explored opportunities through 60 initiatives in 13 sectors that enhance economic, trade and investment partnerships in all fields.

Speaking at the event in May, Saudi Minister of Commerce Dr. Majid Al-Qasabi said that the United Kingdom is the second largest exporter of services in the world, and that his country has promising opportunities and a will to diversify the economy.

He added that joint cooperation between the two countries covers various fields, with a focus on the commercial, financial, digital, cultural, educational and health sectors, as well as sports, tourism and entertainment.