ECONOMY

Ross says Europe still needs work after ECB stress tests

Wilbur Ross, the US billionaire who has invested in some of the euro-area’s crisis-stricken lenders, said Europe’s stress tests fixed only one of the region’s problems.

“The fear that people had had was that there would be another meltdown in the finance sector, which would drive the rest of Europe into some sort of severe recession,” he said in an interview from New York Wednesday. “I don’t think anybody would anticipate that any longer, but that doesn’t mean that all the problems of Europe have been solved.”

Europe has not fully recovered from the global credit crunch and ensuing sovereign-debt crisis, with the euro-area enduring two recessions since 2008 and the recovery from the last one in 2013 still weak. Ross said officials still need to tackle sovereign debt and embrace economic change, including more flexible labor laws.

The European Central Bank said yesterday that 105 of 130 banks passed its balance sheet probe and a test of their ability to endure severe economic pain. Of the 25 failures, only eight have to raise capital.

Ross, who made a 500 million-euro profit on his investment in Bank of Ireland and has invested in Greece’s Eurobank Ergasias SA and Bank of Cyprus Pcl, said the tests should put at rest concerns that the region’s banks still pose a threat to the economy. Previous stress tests by different regulators failed to convince, especially after banks that got passing marks ran into problems.

“Overall, they accomplished what they needed to, in that last time there was fairly universal criticism that they were not severe enough and I don’t think that anyone feels that about this go-round,” Ross said. “I think these stress tests had a lot of credibility to them.” [Bloomberg]