Ifo Institute calls for re-negotiation of Brexit agreement

This is the original of the statement on Brexit agreement re-negotiation from the Ifo Institute. 

The Ifo Institute has called for renegotiations of the Brexit Agreement. "This must be done to prevent the deal from failing. The deal also has to be acceptable to the UK," notes Ifo expert Gabriel Felbermayr. "In this respect, the EU Commission's statement that the current situation is "the best deal and the only possible deal" is not correct," adds the Director of the Ifo Center for International Economics. "Ifo Institute figures show that a hard Brexit would prove costly for both sides, even if the economic losses for Britain and Northern Ireland will be higher than those of the other 27 EU members."

Brexit diminishes the value of EU membership for its other members, warns Felbermayr. This loss exceeds the sums reported so far. The United Kingdom is the second largest economic power in the EU. Its membership of the European Customs Union considerably increases the EU's negotiating power in international negotiations with China and the USA, for example. "According to a study conducted by iIo with the University of Keio in Tokyo, for instance, the EU-Japan agreement without Britain is worth 13 percent less to Japan than with it," notes Felbermayr.  Brexit is also upsetting the delicate balance of power between EU member states. Germany is losing an important free trade ally. Supporters of a protectionist trade policy, on the other hand, will be strengthened by Brexit.

"From a German and a European perspective it would be advisable to offer Britain a political say in the common trade policy. This could be combined with a right to vote on the relevant bodies of the Council and the EU Parliament. A major stumbling block for opponents of the agreement in Britain’s House of Commons relates to the form taken by the transitional customs union. Britain would have to follow European trade policy but would have no claim to reciprocity through third parties. This kind of solution may also be of interest to other countries, like Turkey, which wishes to participate in the Customs Union, but neither wants nor can expect political integration.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.