A potential no-deal Brexit could have impact similar to that of Lehman Brothers bankruptcy in 2008, which contributed to the 2007-2008 global financial crisis, Chairman of Societe Generale Lorenzo Bini Smaghi told Sputnik
BRUSSELS (Pakistan Point News / Sputnik - 13th September, 2019) A potential no-deal Brexit could have impact similar to that of Lehman Brothers bankruptcy in 2008, which contributed to the 2007-2008 global financial crisis, Chairman of Societe Generale Lorenzo Bini Smaghi told Sputnik.
Lehman Brothers, one of the largest investment banks in the United States, filed for bankruptcy in September 2008, which caused the Dow Jones Industrial Average to plummet 4.5 percent in one day.
"We have several risks in the global economy. I think the biggest risk in the short term is Brexit because it is very difficult to forecast what will be the channel of transition to the world economy. And psychological impact on basement, on sentiment could be very strong, and the transmission to the financial market can also be very devastating as we saw, for instance, with Lehman Brothers in 2008. So this is something that we have to monitor very closely," the Societe Generale chairman said.
When asked whether the psychological impact of a no-deal Brexit could really be comparable to the Lehman Brothers bankruptcy, the chairman said that the televised consequences of the 2008 downfall impacted investors' mood, and the same could happen with Brexit.
"It's very difficult to forecast. If you remember the images on television of people losing their jobs, queuing at the banks, this really had an impact on investors' sentiments and market perception. If we have something similar in the United Kingdom, difficulties in people traveling or people finding products in shops ... this, with today's global media, would have an impact on the global economy, which might have effect on the real economy and also on the financial sector," Bini Smaghi said.
