Collapse of American Bank Will Not Directly Affect EU Financial System: Brussels

The Eurogroup finance ministers believe that the collapse of the American Silicon Valley Bank (SVB) will not directly affect the European financial system, but is a signal of the importance of ensuring the stability of the EU banking system in conditions of ongoing uncertainty.

“Since this bank's presence in the EU is very, very limited, we do not see any direct repercussions, but we are closely monitoring developments and taking note of the vigorous response from US authorities,” said Paolo Gentiloni, EU Commissioner for Economic Affairs, after the Eurogroup meeting in Brussels.

He noted that the eurozone economy entered this year in slightly better shape than expected a few months ago, but that shocks in the banking system could occur at any time against the backdrop of overall instability. “Uncertainty remains very high,” emphasized the EU commissioner.

Eurogroup President Pascal Donohue stated that the collapse of SVB, which has shaken the US financial system, is one of the topics being discussed by European ministers. “The problems have arisen from the specific business model of the bank (...), but the picture here in Europe is quite different; our banks are generally in good shape,” assured Donohue.

The Eurogroup's statement adopted at the meeting noted that the eurozone economy has significantly recovered from the pandemic and has weathered the impacts of rising energy prices. However, economic growth is expected to remain “modest in 2023 and gradually increase in 2024.”

“Despite the uncertainty regarding the outlook, especially concerning geopolitical and energy factors, the risks to growth are more balanced than before. This reinforces the necessity for fiscal policy to remain flexible,” the statement said.

The Eurogroup has provided promising guidance for eurozone fiscal policy. In 2023-24, it should focus on ensuring medium-term debt sustainability, as well as adequately promoting stable economic growth and addressing challenges through investment and reforms for a green and digital transformation.