Ifo Institute: New negotiations needed to avoid hard Brexit

This is the opinion released by Ifo Institute, a leading German think-tank:

Munich, 16 January 2019 - The Ifo President Clemens Fuest has warned against a hard Brexit and called on both sides to resume negotiations. "A hard Brexit with its huge costs must be avoided. Both parties should now return to the negotiating table and modify the agreement so that it is acceptable to all sides. Anything else would be an unacceptable policy failure," said Fuest.  Ifo trade expert Gabriel Felbermayr understands the rejection of the Brexit deal by the House of Commons. "British MEPs' rejection of the separation agreement is perfectly understandable because it would downgrade Britain to the status of a trade colony.  It would not stand to gain trade autonomy and its territorial integrity would be called into question," notes Felbermayr.

"An upgraded customs union in which London can have its say, along with additional bilateral treaties along Swiss lines, could be the solution to the deadlock. But Britain also needs to accept economic realities and tackle major trade challenges alongside the EU, not separately. As for the EU, it should break with its political principles of the four freedoms and offer more flexible integration options, excluding, for example, the free movement of persons. This would also create opportunities for the economic integration of other countries with which a political union currently seems unrealistic. In addition to Switzerland, these countries include Turkey, Serbia, and perhaps Ukraine or even Russia in the distant future," explained Felbermayr.