By Francesco Canepa
WASHINGTON The European Central Bank could provide emergency cash to French banks if needed after the first round of France's presidential election on Sunday, but it doesn't expect such a move will be necessary, ECB policymaker Ewald Nowotny said on Saturday.Investors fear that a potential run-off between eurosceptic candidates Marine Le Pen and Jean-Luc Mélenchon would raise questions about France's future in the European Union, roiling financial markets and driving out deposits.Nowotny said the ECB was ready to provide French lenders with Emergency Liquidity Assistance, a lifeline used to prop up the Greek banking sector, but expressed confidence that this will not be needed. "If there should be problems for specific French banks liquidity-wise, then the ECB has the ... ELA, Emergency Liquidity Assistance, but we don't expect of course any special movements," Nowotny, who is Austria's central bank governor, told reporters at the IMF and World Bank spring meetings.
French banks currently have more cash than they need. ECB data shows they had parked 174 billion euros at the ECB in addition to their mandatory reserves as of March 3, the latest day for which data is available. French centrist Emmanuel Macron and far right leader Marine Le Pen were level on 23 percent of voting intentions, according to a BVA poll published on Friday.However, neither is totally assured a spot in the May 7 runoff round as both conservative Francois Fillon and hard-left candidate Jean-Luc Melenchon were following them closely.
Le Pen promised a referendum on France's euro membership while Melenchon vowed to end the independence of the ECB, which is in charge of controlling inflation in the euro zone, and overhaul the European Union or hold a referendum to leave it. As France is the euro zone's second largest economy, many fear its departure would cause the whole currency club to collapse.
Yet Nowotny said "hysteria" surrounding the French vote was overdone.Speaking alongside him, Austrian finance minister Hans Jörg Schelling said any market turmoil after Sunday's vote was likely to be short-lived and the Eurogroup of the euro zone's finance minister would not react to it. "From the experience of the past, this reaction of markets is a very short one," Schelling said. "I don't think there is any reaction from the Eurogroup." (Reporting by Francesco Canepa; Editing by Paul Simao and Chizu Nomiyama)
This story has not been edited by Firstpost staff and is generated by auto-feed.
Firstpost is now on WhatsApp. For the latest analysis, commentary and news updates, sign up for our WhatsApp services. Just go to Firstpost.com/Whatsapp and hit the Subscribe button.
Updated Date: Apr 22, 2017 22:00:07 IST