Brexit and Finance: the point with Loriana Pelizzon

The markets seemed ready to enthusiastically welcome the confirmation of a European Britain, but the cold wakeup call of Brexit caused the stock-market to fall and placed great pressure on the pound. We talk about it with Loriana Pelizzon, Professor in Ca’ Foscari’s Department of Economics and at Goethe University in Frankfurt.

“The stock-market fell - comments the Ca’ Foscari professor and researcher - because the outcome was contrary to the expectation. The markets were not pro-Brexit in any way, and so there was total panic. London was the European financial centre. Is it possible for Europe to function without a financial centre? Of course not. And so efforts will need to be made to create one elsewhere”.

Where will the new European center be?
The most likely possibility is Frankfurt, which is already a prominent financial centre housing a solid infrastructure of services. The alternative is Paris, where the headquarters for the European Securities and Markets Authority is located.

Can we expect a shift of financial offices from London to Europe?
The large banks will transfer their offices to Frankfurt. The union between the German and London stock-markets, on the other hand, will wane: on the lookout for economies of scale, the London Stock Exchange was going to make up 49% of the German stock exchange so as to deal with, for example, the increasing costs of managing technology. The system of authorities and organisms who supervise and regulate the European markets will need to be completely reorganised. It no longer makes sense for the European Bank Association, which takes care of evaluating stress on banks, among other things, to be located in London, for example.

And Italy?
The Italian stock exchange will be the most penalised because it is currently managed by London in its entirety. With London leaving the European context, issues such as regulation and control will need to be faced. If it looks like there could be a unique European centre, with a fusion between Paris and Frankfurt, Piazza Affari could also participate.

Uncertainty seems to be the word for now. What is the outlook?
The first crucial point is the English leadership: it is not clear how negotiations with Europe will unfold. Europe wants the situation to be resolved as soon as possible and is pushing for clear decisions to be made swiftly. Much will depend on Britain’s diplomatic stance. It could prefer bilateral agreements, as is the case with Switzerland, over direct dialogue with Europe, such as is the case with Norway.