Europe: Market could focus on other potential leavers – Danske Bank

Pernille Bomholdt Henneberg, Senior Analyst at Danske Bank, expects a strong policy response from the EU.

Key Quotes

“The eurogroup and EU head of states will in our view respond strongly to the Brexit already today. The eurogroup will likely present a statement communicating that leaving the EU cannot be compared to leaving the euro. Individually, politicians are likely to focus on the difference of being in and outside of the EU with an element of ‘wait and see’. The EP president is set to hold a press conference this morning. Either before or after the upcoming EU Summit on 28-29 June, we look for a stronger, coordinated response from the leaders.

That said, voter opinion across the euro area is sceptical as seen in the latest elections and opinion polls. In light of this, the market could focus on ‘who’s next’ to leave the EU or the euro area.

We do not believe the voter scepticism will result in a euro break-up. There is a strong willingness to keep the euro together and the experience is that across countries individual conditions can be accepted.

The ECB will again be ready to do ‘whatever it takes’ to limit contagion. We believe it will start by using the flexibility under the existing measures.”