English warns of local economic fallout from EU turmoil
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New Zealand banks could suffer disruption if the EU financial crisis deepens, Finance Minister Bill English warned today.
“There is…the possibility that the financial markets in which the New Zealand Government and New Zealand banks borrow could be disrupted at times,” Mr English told the House.
The comments were in response to what was clearly a planted question from National backbencher, Maungakiekie MP Sam Lotu-Iiga.
A default by Greece – which economists are predicting as more likely day-by-day – would have a cascading effect.
“The resulting losses would affect the soundness of European banks and possibly send Europe back into recession. Europe still accounts for 13 percent of our merchandise exports, so any economic weakness in Europe is not good news for New Zealand.”
New Zealand banks are better funded, with more stable, longer-term deposits, than they had in 2008 and they are less dependent on the 90 Day “hot money”.
Uncertainty from the global financial conniptions – especially that of Europe –has already pushed up wholesale funding costs for New Zealand banks, as the National Business Review reported a month ago.
However the banks are less vulnerable than they were, Mr English said.
“There has been concerted action since the 2008 financial crisis to reduce New Zealand’s vulnerability to the financial markets in which we borrow. The Reserve Bank has ensured that our banks are in a sounder position now than they were then.”
Rob Hosking
Tue, 13 Sep 2011
Tue, 13 Sep 2011
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English warns of local economic fallout from EU turmoil
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