EU referendum: IMF accused of ‘bullying’ voters with warnings over Brexit

George Osborne and Christine Lagarde walk to the press conference at the H.M. treasury building in London
George Osborne and Christine Lagarde walk to the press conference at the H.M. treasury building in London Credit: Bloomberg

Summary of IMF warnings and backlash

By Steven Swinford and Szu Ping-Chan

The International Monetary Fund has been accused of trying to "bully" British voters into staying in the EU after it pledged to publish a report warning of the risk of a Brexit on the eve of the EU referendum. 

Christine Lagarde, the head of the IMF, said yesterday that a vote to leave the EU would have "pretty bad to very, very bad consequences" and could lead to a recession.

She said that a Brexit will lead to would lead to a stock market crash and a steep fall in house prices as she pledged to publish a more detailed analysis a week before the referendum on June 23.

She defended the decision to intervene on the eve of the referendum campaign despite having delayed a report ahead of the General Election amid concerns it would impact on the result.

Priti Patel, the eurosceptic employment minister, accused George Osborne of encouraging the IMF to "bully" the British people.

She said: "The IMF warned Britain it was playing with fire when it set out a plan to deal with the deficit. "Now our economy is stronger than nearly every other major economy.

"Today, the IMF is talking down Britain because we want to take back control from Brussels. They were wrong then and they are wrong now.

"The EU-funded IMF should not interfere in our democratic debate a week before polling day.

"It appears the Chancellor is cashing in favours to Ms Lagarde in order to encourage the IMF to bully the British people – it is a sign of the desperation in the IN campaign."

Mrs Lagarde said she had "not seen anything that's positive" about Brexit and warned that it could "lead to a technical recession".

She said that a Brexit could have a "negative and substantial effect" and lead to "severe regional and global damage". She insisted that she had a duty to assess the risks of a Brexit.

When asked whether the Treasury had an input into the report, she replied: "heck no".

In its report the IMF said that a Brexit vote would result in a "protracted period of heightened uncertainty" and could result in a sharp rise in interest rates.

London's status as a "global financial centre" would be at risk of being "eroded", the report said. The IMF suggested that concerns about a Brexit may have affected UK markets in recent months, according to the IMF.

It pointed to a 40 per cent decline in the number of commercial real estate transactions in the first three months of the year.

The Chancellor: "The IMF also put to rest the fallacy that has been peddled by those who say Britain will have more money for public services if we are not paying into the EU budget.

"The IMF are very clear today - the hit to growth we could expect from a vote to leave would cost our public finances more than the amount we would gain from no longer contributing to the EU budget."

However Lord Lamont, the former conservative Chancellor who is campaigning for a Brexit, said: "This daily avalanche of institutional propaganda is becoming ludicrous and pitiful. Important institutions are being politicised and used to make blood-curdling forecasts.

"There are plenty of respected individual economists, plenty of respected professional investors, and plenty of entrepreneurs who take a very different view from Christine Lagarde and who have probably been better at foreseeing the future than the IMF."

                                                                                                    

Corbyn: 'Unlikely' UK would have free trade with EU after Brexit

Asked about the latest warnings from the IMF, he says "there are problems because of the level of trade between Britain and Europe".

He added that he believes it's "unlikely" we would have no trade tariffs if Britain left the EU. Corbyn told the crowd the government is "holding young people back".

He also claimed that those funding the Leave campaign are often people that "want us to go into the bargain basement on taxation, on regulation, on workers' safety. I don't want to go in that direction".

Corbyn urges young Britons to 'grasp the nettle' and vote to stay in EU

This just in from our political correspondent Laura Hughes who is with Mr Corbyn in Liverpool:

Jeremy Corbyn is speaking in Liverpool to a group young activists.

He kicks of by thanking everyone who has campaigned for justice in Hillsborough and  he says he admires the families who stuck it out for so long.

He says the Party's membership has doubled in the last year, but Labour’s youth membership has more than trebled.

He boasts that there are more Labour Party members under 27 than Ukip or the Lib Dems have in total membership.

Corbyn says only 47 per cent of young people who registered voted in the last election actually turned up at the ballot box. "Beat the system" and vote, he bellows.

"If you are concerned about working conditions, the environment and trade agreements- register to vote", he says.

Now onto the EU, he says he's campaigning for us to stay in despite having "deep and severe criticism" of some areas of the bloc.

"I want to work with people across Europe" and deal with the refugee crisis, he says.

“It fills me with hope to know that our movement is reaching out to young people again, because it is you that must shape your future. The people who will be most affected by the decision we make in next month’s EU referendum will not be my generation, but your generation."

The Labour leader says it's young people who will make the difference in this referendum.

On Labour's campaign to remain and reform, Corbyn insists Labour is committed to a vote to stay in the EU and create a real social Europe for the future.

“We will be campaigning across the country to explain why we are convinced that staying in the European Union offers us the best hope of meeting the challenges facing our people and our continent in the 21st century," he says.

“That goes hand in hand with an agenda for progressive reform in Europe: to increase democratic accountability, tackle tax avoidance and climate change, and strengthen workers’ rights across the European Union.

“This is your chance to make it clear that a vote to remain is about taking control of your future," he says. He wants the world to work together to take on the big corporations.

Mr Corbyn ends: "Let's grasp that nettle and do it." 

Asked later by the BBC if he was doing enough to get out and gain the support of Labour voters, he replied:"I'm always mobilising people all the time. It's what I do."

Jeremy Corbyn up soon in Liverpool

The Labour leader will be speaking at a voter registration drive. He has been criticised by some Labour MPs for not putting in the hard graft on the campaign trail.

(Remember he voted No to joining the Common Market in 1975 and refused to rule out backing Brexit during the leadership race last year.)

Interesting to see if Mr Corbyn fully endorses the IMF's dire predictions over Brexit. 

 

Lord Lamont criticises IMF's blood-curdling forecasts

Lord Lamont, the former Tory chancellor, on IMF intervention:

This daily avalanche of institutional propaganda is becoming frankly ludicrous. Important institutions are being politicised and used to make blood-curdling forecasts but out there there are plenty of respected individual economists, plenty of respected well-known professional investors and plenty of entrepreneurs who take a very different view from Christine Lagarde and they have probably been better at forecasting the future of the IMF.

Not so long ago the Chancellor berated the IMF for being too pessimistic about the British economy. Now he cheers them on. Christine Lagarde says what happens in Britain affects other countries in Europe including France. Perhaps what she is really afraid of is that if Britain leaves the EU other countries in the EU will want to hold referendums on their membership of the EU.

Ryanair chief says company will flog tickets to keep people flying after Brexit

Michael O’Leary, Ryanair’s chief executive, has been speaking about the consequences of Brexit at an event for Bloomberg. 

He said the company would sell cheap tickets to ride the fluctuations that will hit the economy after an Out vote.

After 9/11, after every crisis Ryanair is selling cheaper fares, we keep people flying. So the fact is we would have a downward effect on our pricing for 6 to 12 months, but we will keep people flying.

NHS will lose out from Brexit, cabinet minister warns

David Gauke, the Financial Secretary, shared the IMF's warnings today. 

Priti Patel: Osborne using IMF to 'bully' voters

Ms Patel, the eurosceptic employment minister who is backing Brexit, has hit back at the IMF and the Chancellor over today's warnings: 

Priti Patel, the employment minister Credit:  Eddie Mulholland/ Eddie Mulholland

The IMF warned Britain it was playing with fire when it set out a plan to deal with the deficit. Now our economy is stronger than nearly every other major economy. Today, the IMF is talking down Britain because we want to take back control from Brussels. They were wrong then and they are wrong now.

The EU-funded IMF should not interfere in our democratic debate a week before polling day. It appears the Chancellor is cashing in favours to Ms Lagarde in order to encourage the IMF to bully the British people – it is a sign of the desperation in the IN campaign.

Lagarde on timing of Brexit impact report

VIDEO: Lagarde says Brexit brings 'lower output, lower growth and higher prices'

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IMF backs Bank of England's warning over recession

 

IMF denies Treasury influence over report

Christine Lagarde departs following the news conference  Credit: Bloomberg

Asked if the Treasury had had any input into the IMF's conclusions, Ms Lagarde responded: "Heck no! If you are suggesting that, you don't know the IMF."

She told reporters that Brexit "could potentially lead to a technical recession" - two or more quarters of negative growth - in comments that echoed warnings by the Bank of England governor Mark Carney.

Osborne: IMF says Brexit would cost us money

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Eurozone growth revised down 

Eurozone growth for the first quarter of this year has been revised down slightly, from 0.6 per cent to 0.5 per cent. 

IMF report on Brexit to drop in final week of campaign

The IMF will spell out the danger from leaving the EU to Britain's economy in the last week of the campaign, it has emerged. 

Ms Lagarde said a detailed report on an Out vote is expected to come out June 16 or 17 - just days before Britain heads to the polls on Jun 23. 

George Osborne  is pictured as he leaves to attend a press conference with Christine Lagarde Credit: AP

The timing will trigger fury from eurosceptics because it falls during the purdah period when the government is not allowed to publish warnings about the vote. 

 

Lagarde: Impact of Brexit ranges from 'pretty bad to very, very bad'

Ms Lagarde is continuing her analysis of an Out vote and it is all pretty bleak. 

She says the IMF found nothing "positive" for Britain leaving the EU and adds that the consequences are "always on the negative side". 

Ms Lagarde adds that the impact on the economy from Brexit ranges from “pretty bad to very, very bad”. 

The IMF chief also admits "sometimes we are wrong" - a silver lining on the cloud for eurosceptics. 

Christine Lagarde: Warnings made out of 'duty' to UK

George Osborne, the chancellor, is now giving a press conference alongside Christine Lagarde, the IMF's managing director. 

He says the IMF analysis shows fears over Brexit are "already having an impact" on the UK economy and warned that it is "a mere taste of things to come if we vote to leave". 

The IMF has made it clear that a vote to leave the European Union will "cost  us money", Mr Osborne said. 

Ms Lagarde said about the warnings that "we are not doing it out of politics, this is not the job of the IMF", adding that "we are doing this because there is a significant down risk". 

She added the report about the impact of an Out vote was made because of the IMF's "duty to this country and the international community". 

IMF: Brexit could trigger 'self-reinforcing' downward spiral

Here is a key section of the IMF's report spelling out how Brexit could trigger a downward spiral in the UK's economy. 

Another risk is that markets may anticipate such adverse economic effects, provoking an abrupt reaction to an exit vote that effectively brings these costs forward.

This could entail sharp drops in equity and house prices, increased borrowing costs for households and businesses, and even a sudden stop of investment inflows into key sectors such as commercial real estate and finance.

The UK’s record-high current account deficit and attendant reliance on external financing exacerbates these risks. Such market reactions could sharply contract economic activity, further depressing asset prices in a self-reinforcing cycle.

Any limited support for net exports caused by an abrupt sterling depreciation would only partly offset the hit to GDP from reduced consumption and investment, and inflation could also rise well above target for some time.

Contagion effects could result in spillovers to regional and global markets, although the primary impact would be felt domestically.While there is wide uncertainty around the market reaction to a leave vote, as the historical experience with similar events is limited, it is expected to be negative and could be severe. 

 

IMF: Massive drop  in house prices and stocks after Brexit

Szu Ping Chan, Economics Correspondent

Britain risks a massive drop in house prices and tumbling stock markets if the country votes to leave the EU, the International Monetary Fund has warned.

The IMF said next month's referendum posed the "largest risk" to the UK economy as it warned that a vote to leave would "precipitate a protracted period of heightened uncertainty".

An "abrupt reaction to an exit vote" could entail "sharp drops in equity and house prices, increased borrowing costs for households and businesses" that would hit growth, the IMF said.

House prices

It warned that depressed asset prices and slower growth  could trigger a "self reinforcing cycle" that would further weigh on activity.

It said a vote to leave could even trigger a "sudden stop" in money flowing into commercial property and the finance sector, which in the past has been associated with currency crises.

Britain's yawning current account deficit, which measures the difference between money flowing in and out of the UK, also left the pound vulnerable to a "abrupt" fall, the IMF suggested.

The IMF warned long run impact on the UK economy was likely to be "negative and substantial", it added, with "sizeable long-run losses in incomes".

It noted that credible estimates of the hit to UK output ranged from 1.5 to as much as 9.5pc of gross domestic product (GDP).

It said any output losses of more than 1pc of GDP would "more than offset any gains from eliminating the UK's net EU budget contribution of 0.3pc of GDP.

The IMF warned in a April that a vote to leave the EU risked "severe global damage"

Irish PM suggests Common Travel Area could end after Brexit. 

Enda Kenny, the Irish prime minister, has appeared to question whether Britons will still be able to travel to Ireland freely if it votes to leave the EU.

He suggested the Commons Travel Area could not continue after an Out vote during an appearance at an event about the referendum hosted by Bloomberg. 

Enda Kenny, the Irish PM Credit: Ma/REX/Shutterstock/Ma/REX/Shutterstock

Here's what Mr Kenny said: 

It’s only ever operated in the context of the Common Travel Area where both Ireland and the UK were either outside of the European Union or within it.

When we were both outside the European Union we still had a Common Travel Area. Now that we’re both members of the European Union that Common Travel Area applies.

Were Britain to leave and Ireland still remains a member of the European Union that’s a different situation. What do you do with a situation like that?

Sir John Major demands apology from Brexiteers

He will say at the Oxford Union tonight:

The economic argument for Europe is overwhelming:  it is nearly half our export market, and nearly five times bigger than all the 52 Commonwealth countriesadded together - or indeed, six times more than the sum total of trade with Brazil, Russia, India and China.

I passionately believe we must remain in Europe and help shape its future:  geography, trade and logic mean our futures are linked whether we wish it or not.

Sir John Major Credit: Jonathan Brady/Jonathan Brady

In the search for voter support the “Leave” campaign repeatedly overstate their case:  if they were to win, they risk a backlash from those who reasonably might say they were misled.

Those who make such false claims – and knowingly do so – need to apologise that they’ve got their figures badly wrong, and stop peddling a demonstrable untruth – as they have been repeatedly asked to do by the Chairman of the UK Statistics Authority.”

Good morning

Another day on the EU referendum campaign trail. Sir John Major will make his first intervention in the campaign tonight at Oxford University's Union and Jeremy Corbyn will attend a voter registration drive in Liverpool this afternoon. 

The International Monetary Fund (IMF) will also give its take on the consequences of Brexit - expected to be a bleak one - at 10am today. Follow all the latest here. 

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