Britain's decision to leave the EU highlights problems that have plagued Europe for years, but largely been ignored, the former head of Switzerland's central bank says. He describes what Europe must do to find its way out of the current dilemma.
Former central banker and now London-based Blackrock executive Philipp Hildebrand barely slept the night of Brexit, but ultimately wasn't surprised at the result. He is very worried about Europe's consistent lack of growth, which he said ultimately led to British voters' fateful decision.
«We're seeing a very sad moment, but also very important one, in which Europe must realize that things cannot simply go on as they have,» Hildebrand said in an interview with Germany's Handelsblatt (paywall).
Urgent Reforms Needed
One of Europe's main problems is that Europe hasn't grown in recent years, Hildebrand says – France hasn't created any private sector jobs in the ten years to 2014.
An additional eight million Europeans are vulnerable to poverty since the financial crisis, he said in the interview. Dissatisfied with bleak economic prospects, voters are blaming the EU.
ECB Helpless
«The European Central bank can't take care of this, that's a problem that politics has to address,» Hildebrand said.
Hildebrand called for Europe's states to enact reforms such as loosening France's employer-friendly labor laws or a strong German fiscal policy as part of a growth strategy.
«I believe the referendum will be a wake-up call. If Europe cannot generate optimism again with a growth strategy, then centrifugal forces will take over,» he said.
«Achilles Heel»
Hildebrand, who was part of Switzerland's three-governor central bank during the financial crisis, has long been vocal that monetary policy cannot solve Europe's underlying structural problems.
He said the Brexit vote doesn't appear to be a «Lehman moment» – banks still have ample liquidity, for example, and there are few indicates of a credit freeze. Shares in European banks have dropped sharply since the vote was tallied.
«This is because many European banks still have enormous structural problems. This must be monitored closely,» Hildebrand said.
