The eurozone is on the brink of another financial crisis – but leaving the EU would still plunge Britain into recession, the IMF said last night.
In its latest controversial intervention in the referendum campaign, the International Monetary Fund said the eurozone was in danger of being torn apart by political tensions.
It said that while the single currency bloc had recovered over the past six months, the medium-term future looked ‘weak’ and that it was racked by high unemployment and bad debts. It also said the failure of the EU to tackle the refugee crisis had ‘vividly exposed political fault lines’ which threatened the entire European project.
By contrast, the IMF said Britain’s finances were in good health, and it acknowledged that the EU was keen for Britain to remain a member as it faces a ‘critical juncture’.
Yet despite this, the Washington-based watchdog claimed that a vote to leave the EU would be economically damaging to Britain. It claimed that up to half a million jobs could go in the UK and warned of a slump in foreign investment and trade. It also predicts the economy could slow sharply this year before contracting next year.
Eurosceptic economists have argued that Britain will be able to slash tariffs to zero on all imports if it leaves the EU – cutting the price of goods and making households better off. The IMF conceded this ‘would make UK consumers better off, all else equal’. But it argued this would be difficult to achieve in practice.
The IMF’s warnings came in a report that was brought forward by several weeks, and furious Eurosceptics last night said the intervention was ‘deliberately timed and orchestrated’ by the Treasury and Downing Street to ‘intimidate’ voters ahead of the referendum.
Pro-Brexit Tory MP Sir Bill Cash accused the IMF of ‘irresponsible scaremongering’ and suggested its French boss Christine Lagarde was a ‘stooge’ for George Osborne.
Another Eurosceptic, Ukip MP Douglas Carswell, said: ‘The inconsistencies in the IMF’s own report show that they’re telling us what they want us to do – not what will actually happen. Its report confirms the eurozone’s economy is a basket case and yet they insist that we should remain part of it.’ Under its ‘adverse scenario’, the IMF forecasts economic growth will slow from 1.9 per cent if Britain stays in the EU to 1.1 per cent.
The economy will deteriorate more rapidly next year, with GDP shrinking by 0.8 per cent before growing by just 0.6 per cent in 2018 and 1.7 per cent in 2019. If the public vote Remain, the IMF forecasts growth of 2.2 per cent next year, 2.2 per cent in 2018 and 2.1 per cent in 2019.
The watchdog also predicts the jobless rate could rise from its record low of 5 per cent to 5.2 this year, 6 per cent next year and 6.5 in 2018. This would equate to throwing 500,000 people out of work.
