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Open Europe has today released a new report looking in detail at what approach the UK should take to trade, immigration and regulation in the event of a Brexit. The report argues that there is likely to be a small negative economic cost from Brexit in the long run, therefore it looks at how this might be offset. It concludes that the path to prosperity outside the EU lies through: free trade and opening up to low cost competition, maintaining relatively high immigration (albeit with a different mix of skills), and pushing through deregulation and economic reforms in areas where the UK has historically been sub-par compared to international partners. In particular, a round of free trade agreements with Asian emerging economies could deliver a long term boost of 0.6% of GDP, while a deregulation drive could deliver permanent gains of 0.7% of GDP – though this would involve a significant deregulation of employment law and a shift in the UK’s climate change approach. In terms of immigration, the report notes that even those developed economies which have adopted a more controlled points-based system (such as Canada and Australia), have faced higher levels of migration per capita over the past 15 years than the UK.
Several news outlets trailed Open Europe’s new report this morning. Open Europe Chairman Lord Leach of Fairford is quoted on page 2 of The Financial Times as saying, “Voters are little better informed about what the future might look like inside or outside the EU. Brexit will not be an economic disaster and it will not be a utopia.” The report is also cited by Bloomberg, The Guardian and The Sun. Open Europe’s Raoul Ruparel is quoted by Reuters, which also features the report, saying, “The basic trade-off is: yes, there are potential gains post-Brexit, but they are not easy…Are people and politicians willing to do what is necessary to reap these gains? I don’t think the hard choices have been discussed enough.”
Open Europe Intelligence: Where next? A liberal, free-market guide to Brexit The Financial Times Bloomberg The Guardian Reuters The Sun
Maurice Obstfeld, the IMF’s chief economist, yesterday warned that Brexit “could pose major challenges for both the UK and the rest of Europe. 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.” He added that the UK’s exit from the EU’s single market would likely “disrupt and reduce mutual trade and financial flows, curtailing key benefits from economic co-operation and integration”, warning that this could potentially even lead to “severe damage” at the global level. Citing concerns over a potential Brexit, the Fund cut its forecast for UK economic growth this year from 2.2% to 1.9%.
Chancellor George Osborne described the warnings as “the clearest independent warning of the taste of bad things to come if Britain leaves the EU.” However, former Chancellor Lord Lamont described the intervention as “highly political”, adding that “The idea that leaving the EU would cause a disruption to trade is purely alarmist.” The IMF intervention comes as a new ICM poll has found that 45% (+3) of UK voters would vote to leave the EU compared to 42% (-1) who say they would vote to remain.
Meanwhile, in an interview with The Financial Times, Bundesbank President Jens Weidmann argued that Brexit could fuel the mood against greater economic integration in the Eurozone and the EU, saying, “It could lead more people to ignore the very fundamental insight that, in a globalised world, the answer to the challenges is not more fragmentation. That doesn’t mean you have to centralise everything. But in a union you have to seek joint solutions and ensure the liability principle.” He also noted that it would “not be a very smart move” for the remaining EU member states to erect barriers to trade with the UK in the event of Brexit.
The Daily Telegraph
The Financial Times: Weidmann
The Times reports that, in his first major intervention in the EU referendum campaign, Labour leader Jeremy Corbyn will talk of his “personal journey” from opposing EU membership to supporting it in a speech tomorrow. He is expected to frame his support for EU on its role in protecting workers’ rights and holding multinational companies to account. The speech was hotly debated within Corbyn’s inner circle with Seumas Milne, Corbyn’s director of strategy and communications, reportedly arguing that lining up with Prime Minister David Cameron, Chancellor George Osborne and the CBI would undermine Corbyn’s image as a campaigner against elites. However, Corbyn was reportedly swayed by pro-membership interventions from Portugal’s socialist Prime Minister António Costa and former Greek finance minister Yanis Varoufakis.
The Daily Telegraph reports that members of the Midlands Industrial Council, a group of businessmen who have supported the Conservatives for 20 years are planning to donate between £4m and £5m to the leave campaign over the next 10 weeks. The move will be seen as an attempt to redress the balance following the Government’s controversial decision to spend £9.3m of taxpayers’ money in order to send a pro-EU leaflet to every home in Britain. Parliament will debate the Government’s decision to do so on May 9th.
The Daily Telegraph
Bundesbank President Jens Weidmann told The Financial Times, “The ECB has to deliver on its price stability mandate and thus an expansionary monetary policy stance is appropriate at this juncture regardless of different views about specific measures.” He added that the debate in Germany currently “does not focus enough on the broader macroeconomic consequences of [ECB] monetary policy. People are not just savers: they are also employees, taxpayers, and debtors, as such benefiting from the low level of interest rates.”
Financial Times: Weidmann
The European Commission yesterday put forward a new proposal that, if adopted, would force large companies operating in the EU to disclose more tax details. Under the plan, companies whose annual turnover exceeds €750m would have to publish a country-by-country breakdown of how much tax they pay within the EU. They would also need to disclose details of any profits and tax bills generated in countries that the EU considers as ‘tax havens.’ Chancellor George Osborne welcomed the proposal, saying, “The UK has led calls for public disclosure of what tax big firms pay, where, as the EU is proposing.”
The Wall Street Journal
A new report by Oxford University’s Migration Observatory finds that six European countries, Poland, Romania, Spain, Italy, Hungary and Portugal have driven 79% of the increase in EU migration to the UK since 2011. The report also finds that the number of migrants from other EU countries living in the UK increased from 2.5 million in 2011 to more than 3.2 million over the past five years.
In an interview with Frankfurter Allgemeine Zeitung, Chair of the Vote Leave campaign and Labour MP Gisela Stuart says, “It is the inability and unwillingness to change which annoys me about the EU. And now that I am being asked whether I still want to belong to it, I say: No.” She points out that “The idea of the EU to deepen and extend permanently has no future. A Europe with two speeds but one destination – and that with 28 members – does not work.” Asked about sharing this position with UKIP leader, Nigel Farage, she responds, “I view myself as a relatively reasonable politician in the middle [of the political spectrum]. Advocating for Brexit is a legitimate, honourable position. It does not mean that you are a nutcase.”
Frankfurter Allgemeine Zeitung
Klaus Regling, Managing Director of the Eurozone’s ESM bailout fund, told The Wall Street Journal that talks between Greece and its international lenders could be finalised over the coming months. He said, “We are dealing with politically difficult issues like pension reform, income-tax reform, non-performing loans of the banking sector. Under the best of circumstances these are technically and politically difficult issues. But I think it is not unrealistic to expect that over the next four weeks this is going to conclude.”
The Wall Street Journal
French Finance Minister Michel Sapin this morning announced that France is to make additional savings worth €3.8bn this year and €5bn next year in a bid to hit the deficit targets agreed with the European Commission. La Tribune notes that the French government is sticking with its GDP growth prediction of 1.5% for this and next year – more optimistic than the European Commission’s and the IMF’s.
The European Commission has told Greece it must improve the protection of its external borders or face extended internal-border controls across other Schengen States. The Commission complained of Greece’s “lack of detailed timeframes given for the completion of actions,” and a “lack of information about the authorities responsible for implementing the recommendations.” Meanwhile, Kathimerini reports that Greek authorities say they will start ruling in the next two weeks on “hundreds” of asylum applications made by migrants stranded in Greece. Separately, the Italian coastguard said on Tuesday that it had rescued 4,000 migrants at sea in two days, indicating that Libya will become a more significant migrant launching-point.
Ahead of a Dutch parliamentary debate to discuss the EU-Ukraine Association Agreement Treaty this evening, opposition party D66 has tabled motion to prevent the ratification of the non-trade aspects of the deal. Prime Minister Mark Rutte’s social democratic coalition partner, PvdA, which has pledged to respect the outcome of the referendum, released a statement saying, “If you want to change the Treaty, you need to stay at the table… If you merely say “No,” the other 27 [EU states] can just continue.” MPs have called on Rutte to clarify what he’s promised the Ukrainian government.
Ukrainian President press release
The New York Times reports that the European Commission has set a deadline of July 12th for the Member States and the European Parliament to decide on whether to impose visa requirements on travellers from the US and Canada into the Schengen Area. At the moment, Americans and Canadians can generally travel to Europe without a visa but many new EU member states, such as Bulgaria and Romania, do not get the same treatment in return. This lack of reciprocal treatment is at the centre of the dispute with the European Commissioner for citizenship and migration saying “EU citizens rightly expect to travel without a visa to any third country whose citizens can enter the Schengen area visa-free”. Open Europe’s Pieter Cleppe was interviewed by CCTV English on this matter.
The New York Times
The European Conservatives and Reformists (ECR) group in the European Parliament has expelled Marcus Pretzell – the remaining member of Germany’s populist Alternative for Germany (AfD) party. Yesterday’s motion to expel the AfD – following earlier statements about using lethal force to prevent illegal migrants entering the country – was supported by 45 ECR members. Thirteen ECR members voted against, while five abstained.
Frankfurter Allgemeine Zeitung
A weekly Forsa poll for RTL-Stern sees German Chancellor Angela Merkel’s CDU/CSU party fall one point to 34%, while its coalition partner, the SPD, remains on 21%. The Greens are up on 14% (+1), Die Linke also climbs to 9% (+1), while the AfD and FDP remain on 10% and 7% respectively. 52% say they prefer Angela Merkel as Chancellor (+1), with only 12%(-1) saying would cast their vote for Vice Chancellor Sigmar Gabriel of the SPD. German’s ruling coalition will today hold talks on the possibility of adopting a joint-position paper on asylum, integration of migrants and anti-terrorism.