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Economists warn of Brexit, but not everyone’s convinced

The question of whether Brits should vote to remain a member of the European Union or go it alone rarely fails to evoke some level of emotion or trigger the occasional riposte. A recent debate in Berlin was no exception.

The question of whether Brits should vote to remain a member of the European Union or go it alone rarely fails to evoke some level of emotion or trigger the occasional riposte. A recent debate in Berlin was no exception.
Three weeks before a key referendum in the United Kingdom, British and European economists and politicians exchanged opinions – and a few barbs – over whether exiting the bloc would do more harm than good.

That could have something to do with the fact that many economists and international organizations – most recently, the Organization for Economic Cooperation and Development and the G7 – are warning of the unforeseeable, and potentially dire, consequences that leaving the 28-member bloc would have on Britain’s economy.

Uncertainty, they argue, discourages investment and can be a job killer.

“The majority of economists who have looked at the alternative of leaving as against staying are all worried about the implications for the UK in the short term,” Vicky Pryce, a chief economic adviser at CEBR London, said at a debate in Berlin, hosted by the British pollster YouGov.

Just talking about the UK exiting the EU has already had an adverse effect, Pryce added, pointing to a drop in business investment in the last quarter.

On the back foot

But not everyone’s convinced. Iain Duncan Smith, a prominent “Brexiteer” and a senior member of Britain’s Conservative Party who attended the debate, minced no words expressing his doubts about expert prognostication.

“I don’t believe that economists are any good at forecasting the future any more than the witch doctor with a few bones in a bucket,” he said. “I will start listening to economists’ forecasting when they actually once in a while get something right.”

Far more than the UK’s access to the EU single market, the largest economic bloc in the world, British voters were concerned about issues that hit closer to home, Smith said a day later, speaking to DW during a studio interview on Wednesday.

The “Leave” camp has been largely on its back foot when it comes to the potentially negative effect that leaving the EU could have on jobs and wages in the UK. In response, the narrative has shifted to issues like migration or reclaiming sovereignty from Brussels.

No free lunch

Smith’s comments were backed by a recent YouGov poll that found 62 percent of British voters believed migration and welfare benefits represented the most important area in which there is need for reform within the EU. That category was also ranked the most pressing by Germans (52 percent) and the French (43 percent).

But the economic dangers are not to be discounted. (Pryce, an economist in London, skewered a journalist on stage during the debate when he suggested the economic consequences were immaterial. “You cannot say with a straight face, ‘Don’t worry about it,'” she said.)

One particular concern is that the UK won’t have an easy time renegotiating new bilateral trade deals with the EU that gave it the same freedoms it enjoys now.

“The very unlikely case is that the UK would get a free lunch from the European Union,” said Michael Wohlgemuth, an economist with the Open Europe Berlin think tank. “There would be no obligations to give the UK a sweet trade deal.”

Hooray for uncertainty

That sentiment was echoed by another question in the YouGov poll, which asked respondents whether they opposed offering Britain trade deals without preconditions.

Thirty-two percent of respondents in Germany said a quid pro quo should involve the Brits paying some financial contributions to the EU budget, while 18 percent said Brussels should only strike a free trade deal with London if the British government agrees to let EU citizens work and live there.

That compares to 41 percent of British respondents who thought the UK deserved a free trade deal free of any preconditions. Twelve percent said Britain should pay, and 9 percent said London should trade access to its labor market for EU citizens in exchange for access to the EU single market.

But for every pro-EU argument put forward, there seemed to be one from the “Leave” camp ready to contradict it. And for at least one participant of the debate, uncertainty wasn’t enough to sway him.

“If you say, ‘It’s all uncertain,’ I say hooray,” said Simon Jenkins, a commentator for the Guardian who played the role of a “Brexiteer” in Berlin, although he said he hadn’t totally made up his mind. “Certainty is the death of political change.”

Topics: Economists

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