"Anti-elite sentiment may lead to Brexit, warns PM's 'best friend'"
Annual report on the British economy predicts ‘negative and substantial’ effects if Britain left the EU
IMF chief Christine Lagarde speaks in Vienna about the consequences of a British exit from the EU. Photograph: Georg Hochmuth/AFP/Getty Images
Katie Allen
Saturday 18 June 2016 09.00 AEST Last modified on Saturday 18 June 2016 09.01 AEST
Leaving the EU would hit British living standards, stoke inflation and wipe up to 5.5% off GDP, the International Monetary Fund has warned with less than a week to go until the referendum.
The IMF used its annual report on the British economy to say Brexit would plunge the UK into recession next year and that it could see no economic advantage in leaving the EU.
Responding to the latest IMF remarks, Matthew Elliott, chief executive of Vote Leave said: “The IMF has chosen to ignore the positive benefits of leaving the EU and instead focused only on the supposed negatives. If we vote leave, we can create 300,000 jobs by doing trade deals with fast growing economies across the globe. We can stop sending the £350m we pay Brussels every week. That is why it is safer to vote leave.”
The resulting uncertainty would hit spending and financial markets, it said, estimating that even under a relatively benign scenario in which the UK negotiated a trade status similar to that between Norway and the EU, output would fall by 1.5% by 2019, compared with where it would be under continued EU membership.
It modelled a less favourable outlook, in which GDP would fall more steeply. “In the adverse scenario of long negotiations and a default to the trade rules of the World Trade Organisation, GDP plunges by 5.5% by 2019,” it said.
Under that scenario, the UK would fall into recession in 2017, IMF officials said. “The implication would be negative growth in 2017,” said one official briefing reporters in a conference call.
In a baseline scenario in which the UK remains in the EU, growth would be expected to recover in late 2016, as the effects of the referendum waned. But the IMF’s experts also forecast various threats to the UK economy beyond the closely fought vote.
The report said: “In the event of protracted demand weakness and inflation undershooting, monetary and fiscal policies should be eased, taking into account the benefits and potential costs of such a move.
“Conversely, monetary tightening may need to be initiated earlier than currently envisaged if core inflation or wage growth in excess of productivity growth begins to rise sharply.”
In the near term, the main risk to Britain’s economy was next week’s referendum, the fund’s directors said. “While recognising that this choice is for UK voters to make and that their decisions will reflect both economic and non-economic factors, directors agreed that the net economic effects of leaving the EU would likely be negative and substantial,” they said in a press release accompanying the report.
“In the event of a vote to leave, directors recommended that policies be geared toward supporting stability and reducing uncertainty.”
Brexit would also hit neighbouring EU economies, though the impact would be smaller than in the UK, the IMF said. “Ireland, Malta, Cyprus, Luxembourg, the Netherlands and Belgium would likely be most affected.”
The IMF’s reports on the UK had been scheduled for Friday but publication was delayed after the murder of Labour MP Jo Cox in West Yorkshire on Thursday.
Consequences of Brexit sink in for US politicians after killing of MP
Dan Roberts and Ben Jacobs in Washington Saturday 18 June 2016 04.46 AEST
The death of UK member of parliament sent a shock through Washington as the EU referendum vote could affect foreign policy and international relations
Barack Obama campaigned against the UK leaving the European Union when he visited London in April. Photograph: Will Oliver/EPA
Dan Roberts and Ben Jacobs in Washington
Saturday 18 June 2016 04.46 AEST Last modified on Saturday 18 June 2016 09.25 AEST
The shock felt in Washington at what Hillary Clinton called the “assassination” of British MP Jo Cox has coincided with a belated American realisation of just how febrile UK politics has become ahead of next Thursday’s vote on leaving the European Union.
While the US has been mourning victims of the Orlando shooting and digesting new extremes of anti-immigrant rhetoric from Donald Trump in response, the extent to which the European migration debate has driven the UK to brink of “Brexit” had gone less noticed.
“The recent [pro-Brexit] opinion polling is only just beginning to sink in here,” says one senior European diplomat trying, behind the scenes, to reassure Washington’s increasingly nervous foreign policy community about the future of the Atlantic alliance.
Previous White House intervention was focused on spelling out the cost of leaving the EU to British voters. Barack Obama hoped his trip to London last month – in which he described how the UK would be “at the back of the queue” for trade negotiations if it left – would help the prime minister, David Cameron, scare voters into staying put.
But despite similar dire warnings .. https://www.theguardian.com/business/2016/jun/17/imf-chief-christine-lagarde-urges-britain-to-stay-in-europe .. again this Friday from the International Monetary Fund head, Christine Lagarde, the steady swing of British opinion polling in favour of Brexit is raising concerns that it is not just the UK that stands to lose, but US foreign policy would also suffer greatly from a subsequently weakened Europe.
“Among the foreign policy elites there’s a consensus that the special relationship with Britain would become less special from the United States’ perspective if Britain isn’t influencing Europe,” says Fred Kempe, president of the Atlantic Council, a prominent Washington thinktank. “No doubt there is still going to be a great military relationship and trade etc, but in terms of solving global problems together it’s far better [for the US] to have Britain in.”
“Both the US and Europe view the UK as a transatlantic bridge,” added the Washington-based EU diplomat. “There is no European country that understands the US better than Britain, and no better explainer of the American view to Europe.”
There is also sympathy for the predicament that the UK find itself in. “There is an understanding that the European Union is a flawed place,” says Kempe. “But there is also a feeling that it would become more flawed without Britain in.”
One senior Japanese diplomat in Washington confided privately that while his government was bemoaning the impact of Brexit on Japan’s European-exporting car factories in Britain, he personally could understand the desire to reassert national sovereignty.
Among US politicians too, Brexit has become a somewhat partisan issue. While Democrats and many establishment Republicans share in collective angst over the security consequences of the UK leaving the EU, conservatives in the GOP have been far more sympathetic.
In a March interview, Republican presidential candidate Rand Paul argued that the United Kingdom should never have joined the EU. Ted Cruz has been agnostic on the subject, while condemning Obama’s visit to the UK to campaign against Brexit.
Most noticeably, presumptive Republican nominee Donald Trump has explicitly come out in support of UK withdrawal from the EU, linking British membership to “migration”.
“I think the migration has been a horrible thing for Europe,” Trump told Fox News in May. “A lot of that was pushed by the EU. I would say that they’re better off without it, personally, but I’m not making that as a recommendation. Just my feeling.”
But the extent to which populist anxiety about immigration is being stirred up on both sides of the Atlantic with unpredictable and possibly violent consequences is also causing growing alarm.
“It is critical that the United States and Britain, two of the world’s oldest and greatest democracies, stand together against hatred and violence,” said Clinton, in response to Thursday’s killing of a pro-immigration MP by an assailant allegedly shouting “Britain first”.
“This is how we must honor Jo Cox – by rejecting bigotry in all its forms and instead embracing, as she always did, everything that binds us together,” added the presumptive Democratic nominee.
“Her maiden speech in parliament celebrated the diversity of her beloved Yorkshire constituency, and passionately made the case that there is more that unites us than divides us. It is cruel and terrible that her life was cut short by a violent act of political intolerance.” https://www.theguardian.com/us-news/2016/jun/17/us-politics-brexit-eu-referendum-jo-cox