G20 Puts ‘Brexit’ on List of Top Global Risks After Push by UK Government

By Jan Strupczewski and Brenda Goh | February 29, 2016

British finance minister George Osborne pushed financial leaders from the top 20 economies to include the risk of Britain leaving the European Union in their list of dangers to the world economy on Saturday, gaining explicit support from the United States.

Britons will vote in a referendum in June 23 on whether to remain part of the 28-nation EU.

British Prime Minister David Cameron negotiated a special status for Britain in the bloc last week to help convince eurosceptics that continued membership was more beneficial than leaving.

The risk of Britain exiting the EU, dubbed “Brexit,” was not in the original draft of the communique of finance ministers and central bankers of the top 20 economies, but was added on the insistence of Britain, G20 officials said.

In a significant boost for Cameron and Osborne, U.S. Treasury Secretary Jack Lew expressed clear support for Britain’s continued membership of the EU.

“Our view is that it’s in the national security and economic security of the United Kingdom, of Europe and of the United States for the United Kingdom to stay in the European Union,” Lew told a news conference.

Lew’s references to economic and national security marked a strengthening in his rhetoric, having previously described Britain’s EU membership as being in the global interest.

“This is an issue that will be decided by the voters of the United Kingdom in June and we certainly hope that (they) reach that conclusion,” Lew said.

The final G20 communique, seen by Reuters, lists “a shock of a potential UK exit from the European Union” as one of the risks to the global economy, alongside volatile markets, cheap commodities and the migration crisis.

“It was the British who called for it, but it didn’t meet with opposition,” one G20 official said. “Everyone around the table would rather avoid a shock of that sort at such a fragile time for the global economy.”

Osborne said finance ministers and central bank governors were unanimous in their belief that a British departure from the European Union could cause a global economic shock.

Christine Lagarde, managing director of the International Monetary Fund, confirmed that delegates discussed a British departure from the EU as a downside risk for the global economy in their meeting.

“That’s the reason why it found its way (into the communique) as soon as the meetings effectively started,” she said.

Some G20 officials saw the inclusion of the line on Britain in the communique as a way to draw attention to the negative consequences of exiting the EU to support Cameron’s campaign to stay in.

Italian Finance Minister Pier Carlo Padoan said a decision by Britain to leave the EU, which it joined in 1973, would have negative global consequences.

“We would classify a UK exit from the EU as a powerful geopolitical shock, a negative shock,” he told reporters in Shanghai.

The City of London is a major global financial center, accounting for roughly 10 percent of Britain’s gross domestic product (GDP) and some bankers think leaving the EU could disrupt business and force many financial institutions to move out.

Opinion polls in Britain differ over the likely outcome of the June 23 referendum. Uncertainty about Britain’s future in Europe sent its currency to a seven-year low against the U.S. dollar earlier this week.

(Additional reporting by Andy Bruce in London; editing by Helen Popper and David Evans)

Related:

Get Insurance Journal Every Day

Add a Comment

Your email address will not be published. Required fields are marked *

*

More News
More News Features