Taking a macroeconomic perspective, Paul Welfens reflects what the findings of his book ‘An Accidental Brexit’ mean in light of new developments in the Brexit negotiations. He argues that if the true economic consequences had been known, the referendum would have turned out differently and shows the potential pitfalls of the ‘Global Britain’ approach to international trade.
The joint statement by PM May and President of the European Commission Juncker on 8 December declared: there is a basic agreement on the ‘Exit Treaty’, including a UK payment of £35 to £39 billion and the British promise to avoid a hard border regime in Northern Ireland. Hence, Stage II of the negotiations can start in the near future. An exit treaty opens up options to avoid a No-Deal Brexit which would bring a net welfare loss of approximately 16% of UK real income as estimated by the European Institute for International Economic Relations (Discussion Paper 234).
Ian Preston, Professor of Economics at UCL, notes that Brexit will likely lead to reduced migration. As migrants tend to be of working-age, this could result in a smaller proportion of the population comprising the labour-force, which could have a negative impact on UK tax receipts and public finances more broadly.
Brexit will have high fiscal costs and a large part of that will be a consequence of what happens to migration numbers. That was the conclusion widely drawn from the Office for Budget Responsibility’s most recent Economic and Fiscal Outlook published in late November – the first since June’s referendum vote. It was illuminated further by supplementary analysis published on December 8.
It is becoming increasingly clear that economists were wrong to forecast a major economic shock immediately after the Brexit vote. Iain Begg, Professorial Research Fellow at the LSE European Institute, asks whether the pessimists are wrong, whether it’s too early to tell or whether there are other forces at work?
More than five months on from the referendum, it is still hard to establish how much the vote to leave the EU has affected the economy, let alone what will happen next. The more extreme projections of a slide into recession have, so far, proved to be unfounded. Critics of ‘project fear’ will be gratified to see the latest data from the Office for National Statistics (ONS) confirming the earlier flash estimates for third quarter GDP, which show that the British economy grew at an annual rate of 0.5%. Buoyant employment data tell a similar story.
In the wake of a surprise re-election of Alexis Tsipras and Syriza, Thomas Piketty, Professor at Paris School of Economics and at EHESS, discusses the need for a more active approach from European leaders when it comes to the Greek question – and for a eurozone parliament to be established.
+++Thomas Piketty will speak at the UCL European Institute on 14 December 2015+++
The Tsipras victory has come as a surprise to some. What has changed for Greece?
Normally, we would expect some stability in the coming years. But above all, Greece and Europe need to make up for lost time. Until now, Europe has obstinately refused to talk seriously about restructuring Greece’s debt. That was what caused the downfall of the last government. Continue reading
Two of the currently most popular hashtags on Twitter reflect Britain’s debate on whether to leave the EU (#Brexit) and the possibility of Greece leaving the euro (#Grexit). But although they differ only by their first letter, those two topics are by no means the same. In this post, Filipa Figueira, Teaching Fellow in Economics at UCL, explores how the two are nonetheless closely linked and how addressing one may help resolve the other.
A decision on being part of the European Union is very different from a decision on being part of a common currency. Although the word ‘euro’ makes the common currency sound like a core aspect of ‘Europeanness’, it is in fact only one of the EU’s many policies. And, as the British example shows, it is perfectly possible to be an EU member without participating in the euro currency.
Yet confusion reigns. When, in early July, a Greek exit of the euro seemed possible, many jumped to the conclusion that the country would need to leave the European Union too. This included, for example, the President of the European Parliament Martin Schulz – who really should know better, as that would of course not have been the case.