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ECB's Vasle says trade restraints biggest risk to euro zone - report

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LJUBLJANA (Reuters) – Trade limitations are the biggest risk for the euro zone, ECB governing council member Bostjan Vasle said in an interview that will be published in Slovenian daily newspaper Delo on Saturday.

“Between big global forces there is a trend of trade limitations which we have not been used to since the Second World War. That is the biggest risk to Slovenia and the euro zone,” said Vasle, who took the position of Bank of Slovenia governor in January.

“In such an environment Brexit additionally worsens matters, negative effects can be seen in the area of investment. For now they are mostly limited to the United Kingdom but can quickly spread into international environment in the case of Brexit without an agreement,” he added.

He said the economic cycle in the euro zone has turned down, adding it is not possible to say how fast and deep the turn will be. “For now we are talking about slowdown of economic growth.”

He stressed the need for a unified euro zone scheme for protection of bank deposits.

“Here we (the ECB) are still trying to convince decision makers. This has to be done before a new financial crisis erupts.”

He urged bank consolidation in the euro zone and Slovenia which would lead to better performance by the banking sector.

He also said the Slovenian banking sector was solid, adding “there are no major risks for citizens, the economy and the whole state” as far as banks are concerned.

Slovenia narrowly avoided an international bailout for its banks in 2013 when the government had to pour more than 3 billion euros (2.6 billion pounds) into local banks to prevent them from collapsing under a large amount of bad loans.

Since then banks have returned to profit, with joint net profit of the sector up by 17 percent in 2018, while non performing loans dropped to 4 percent of all loans.

(Reporting By Marja Novak; Editing by Toby Chopra)

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