Saturday

25th May 2019

IMF: Brexit would cause severe damage

  • IMF chief Christine Lagarde (r) and British PM David Cameron (l). A Brexit would pose "major challenges for both the United Kingdom and the rest of Europe", the fund said. (Photo: IMF)

The usually dry analysis by the International Monetary Fund (IMF) has become the centre of a heated debate in the UK after it said on Tuesday (12 April) that a British exit from the EU would do "do severe regional and global damage".

The IMF has been accused of scaremongering by pro-Brexit campaigners, but the UK government said the British people should listen to the Washington-based institution's "stark warning".

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

In its biannual World Economy Outlook, the IMF said that a Brexit after the 23 June referendum on the UK's EU membership "could do severe regional and global damage by disrupting established trading relationships".

The IMF said that the referendum itself "has already created uncertainty for investors".

A vote for Brexit would pose "major challenges for both the United Kingdom and the rest of Europe", the fund said.

"Negotiations on post-exit arrangements would likely be protracted, resulting in an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increasing financial market volatility," it explained.

It added that a UK exit from the EU's single market "would also likely disrupt and reduce mutual trade and financial flows".

The fund also noted in its report that between last August and February this year, the British pound depreciated by 7 percent, partly over concerns about a potential exit from the EU.

'Storm on our horizon'

"This is a stark warning that should ring loudly in the ears of families and businesses across the country," British prime minister David Cameron said after the report's publication.

“There is a storm on our horizon. We can hear the thunder if we are willing to listen. But it is in our power to protect ourselves.”

His finance minister George Osborne said the IMF was giving "the clearest independent warning of the taste of bad things to come" in case of Brexit.

He asked: “If the British economy is hit by the mere risk of leaving the EU, can you imagine the hit to people’s income and jobs if we did actually leave?”

In its report, the IMF predicts a 1.9 percent growth in 2016 and 2.2 percent in 2017, above the growth forecast for the whole EU.

Leaders of the Brexit campaign dismissed the IMF's warning, saying the fund's predictions were not reliable and that they were politically motivated.

Norman Lamont, a former chancellor of the Exchequer under Margaret Thatcher, said the fund was "closely connected" to the EU and the eurozone.

"Just two years ago, the chancellor [Osborne] was arguing the IMF's forecasts were far too pessimistic and shouldn't be heeded, and he was right to do so. They were wrong then, and they are wrong now," he said.

"The idea that leaving the European Union would cause a disruption to trade is purely alarmist. The bigger risk to the UK is remaining inside an EU which is taking more and more control, and which cannot cope with the challenges facing it."

'Cosy EU cartel'

The MEP and leader of the eurosceptic Ukip party Nigel Farage said the IMF had been "hijacked by the architects of the failing EU project".

"This is all about the big banks and the establishment protecting their interests within a cosy EU cartel that looks after multinational corporations and dismisses the democratic wishes of the average man, woman or small and medium sized business," he said.

The leader of the Vote Leave campaign, Matthew Elliott, said remaining in the EU was “the biggest risk to the UK’s economy and security” because the union was “institutionally incapable of dealing with the challenges it faces, such as the euro and migration crises”.

Last month, the Moody's rating agency said that while "the economic costs of the UK leaving the European Union would outweigh the potential benefits", the impact on credit would be "manageable".

"Both the UK and the EU would want to avoid an unnecessary large-scale disruption to trade and capital flows, given their deep economic and financial ties," Moody's said.

According to the latest opinion polls, the leave side is slightly ahead with an average of 43 percent support against 42 percent for those wanting to remain in the EU.

Cameron: No second chance after Brexit vote

David Cameron has set out the EU-UK deal in the House of Commons, taking aim at his Tory rival Boris Johnson who suggested that after a No vote the UK could get a better deal.

French and Italians want UK-type votes on EU

Italians and French say in a poll they want a referendum on the EU, as British PM Cameron prepares to invoke the perils of "isolationism" and WWII in a pro-EU speech.

Opinion

Stumbling towards Brexit

When Britons enter polling booths on 23 June they will be voting as much with their hearts as with their heads, and that puts the Remain campaign in big trouble.

News in Brief

  1. UK's May announces June 7 resignation date
  2. Ireland votes for EU election and divorce referendum
  3. Report: May to announce resignation plan on Friday
  4. Leading politicians: time for EU to have female leaders
  5. Poll: Finland's Green party to surge in EU elections
  6. High demand for postal voting in Denmark
  7. Some EU citizens turned away at UK polling stations
  8. Switzerland unlikely to sign draft EU deal

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Latest News

  1. Irish greens take Dublin in second EU exit poll
  2. EU election results to trigger top jobs scramble This WEEK
  3. Don't tell the Dutch - but Timmermans 'won'
  4. EU says goodbye to May with 'respect'
  5. Strache scandal: how big a hit will Austrian far-right take?
  6. Italy train row exposes competing views of EU
  7. Dutch socialists on top in first EP election exit poll
  8. No usage data kept for EU parliament's 'Citizens' App'

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic commitment to driving global gender equality
  2. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  3. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  4. Nordic Council of MinistersNordic talks on parental leave at the UN
  5. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  6. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  7. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  8. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  9. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  10. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  11. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  12. Nordic Council of MinistersNordic ministers take the lead in combatting climate change

Join EUobserver

Support quality EU news

Join us