LONDON – When Christine Lagarde was asked if her independent assessment had been meddled with by the Treasury, her response was “Heck no!” – “if you are suggesting that, you don’t know the IMF.” The IMF Chief, Christine Lagarde, was in London on Friday to present the fund’s annual health check on the UK economy where she warned about the possible dangers of Britain leaving the European Union.
Ms Lagarde believes that a vote to leave would have “pretty bad to very, very bad consequences” and could lead to a recession. Immediately following the referendum she argued that there may be a stock market crash and a steep fall in house prices. She pointed to the 40 per cent decline in the number of commercial real estate transactions in the first three months of 2016 as proof that the uncertainty surrounding the future of the British economy was leading to economic instability. The report said that a Brexit would result in a long period of “heightened uncertainty” which could result in a sharp rise in interest rates and London’s status as a global financial centre being gradually eroded as business moves to the continent. Ms Lagarde says that the IMF will publish a more detailed analysis a week prior to the June 23rd vote.
The IMF had previously warned that a Brexit could cause “severe regional and global damage” as it would disrupt established trading relationships and cause “major challenges” for both the UK and the rest of the world. On Friday, Ms Lagarde further stressed that this issue is not simply a domestic one, but an international one as well; saying that over the past six months she had not “visited a country anywhere in the world where I have not been asked ‘what will be the economic consequences of Brexit?”
George Osborne, the Chancellor of the Exchequer, welcomed this call saying that the “IMF has given us the clearest independent warning of the taste of bad things to come if we leave the EU.” This sentiment was echoed by the Prime Minister who tweeted “The IMF is right – leaving the EU would pose major risks for the UK economy. We are stronger, safer and better off in the European Union.”
The IMF Chief has been accused of trying to “bully” British voters into staying in the EU after publishing this report. Vote Leave, the main Brexit campaign, says that the IMF is being used by the Government to circumvent the purdah rules regarding the fairness of the referendum campaign. A similar view was taken by Priti Patel, the Eurosceptic employment minister, who referenced the previous failures of the IMF, when they warned that Britain was “playing with fire” when it set out a deficit reduction plan. Now that Britain’s economy is stronger than nearly every other major country she stressed that “they were wrong then and they are wrong now.” Lord Lamont, a former Chancellor, dismissed the IMF’s assertions saying there was no “real” evidence for their claims and that the IMF was bound to reflect the views of the EU, to whom they are very closely connected.
There are still five weeks to go until the polls open.
– Cameron Martin, Correspondent (Business)