Italy’s deputy finance minister has called for a more realistic and measured assessment of the Brexit process and how the U.K.’s split from the European Union will affect economies across the continent.
Speaking on the sidelines of the Ambrosetti Finance Workshop in Cernobbio, Italy, Enrico Morando said there would be no Doomsday scenario for Britain but claimed there were still risks for the U.K. economy after the breakup is complete.
“To be honest with you, I think that Brexit is a greater threat to the U.K. economy than for the economy of the European Union,” he said Saturday.
“It is not as easy to predict, as those who assumed catastrophic consequences. In my opinion those who have prophesied for magnificent consequences from the U.K. leaving haven’t taken into account the positive and negative interest points from both sides of the field, and it should be done in a more balanced manner,” he added.
Looking at the negotiations – which are now formally underway – Morando said there must be a “certain restraint” from commentators who should refrain from “extremism” and “radicalism”. It shouldn’t be assumed the U.K. would be involved in a “disastrous economic failure” because of its choice, said Morando.
“Let’s not even go back to the famous phrase that when there is fog in the (English) channel, the continent is cut off, as that is very much not the case,” he said. He added that U.K.’s decision to leave the European Union must be respected by governments of all member countries and called for transparent negotiations.
Britain’s economy has been fairly resilient since the vote last June to leave the EU. Sterling has plummeted to lows not seen for 31 years, but economists have underlined that the currency has acted like a pressure valve, giving a vital boost to exporters in a time of economic stress.
However, some notable voices are now predicting a downturn for the U.K. as rising inflation starts to affect consumer spending in Britain. In a recent UBS survey of 2,000 respondents, the results showed a “dramatic reduction in consumer discretionary income and intention to spend”, with the biggest drop in sentiment related to clothing. UBS added that while consumer confidence had remained steady so far, they expected that with real wages set to fall, discretionary spend would follow.
Richard Portes, professor of economics at London Business School, told CNBC Friday that the euro area’s economy has been picking up, but trouble should be expected for the British economy.
“We’re all going to be – both on the U.K. side and the EU-27 side – we’re all going to be worse off. There’s no way that you can avoid the shocks, the negative shocks that will come from breaking the past trade, investment and so forth relationships that we’ve had,” he said at the same event in Italy.
“I think the (Bank of England) is going to be facing a hard choice towards the end of this year, because I think that consumer expenditure will be slowing down, investment will not be picking up and inflation will be picking up,” he added.
—CNBC’s Alex Gibbs contributed to this article.