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IMF says Brexit 'bad to very, very bad'

BBC News BBC News 13/05/2016

Christine Lagarde © BBC Christine Lagarde The International Monetary Fund chief has said a vote by the UK to leave the European Union would have "pretty bad, to very, very bad" consequences.

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

She echoed similar comments made on Thursday by Bank of England governor Mark Carney.

Vote Leave said the IMF had been wrong in the past and were "wrong now".

The IMF said in a report on the UK economy that a leave vote could have a "negative and substantial effect". It has previously said that such an outcome could lead to "severe regional and global damage".

Ms Lagarde said the Fund had a duty to assess the risks of Brexit.

It was not just a domestic issue but an international one as well, she told a briefing at the Treasury attended by the Chancellor, George Osborne.

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"I don't think that in the last six months I have visited a country anywhere in the world where I have not been asked 'what will be the economic consequences of Brexit?" she said.

'Heck no!'

"And in addition to Greece, Ukraine and a few others, what will be the outcome if the UK was to leave the European Union and what will be the consequences. So it is out of duty and loyalty to our mission that we have to study that in depth.

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."

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.

That would cause volatility on financial markets and economic output to decline and could also erode London's status as a global financial centre, it added.

Priti Patel MP, who is backing the leave campaign, said the IMF was "wrong then and they are wrong now. It appears the Chancellor is cashing in favours to Ms Lagarde in order to encourage the IMF to bully the British people."

Priti Patel MP accused the IMF of 'bullying' UK voters © Getty Images Priti Patel MP accused the IMF of 'bullying' UK voters

The Fund said it expected growth to fall below 2% for the full year in 2016 before returning to an average of 2.25% over the medium term.

However, the IMF said that this "broadly positive" forecast was subject to notable risks, the biggest of which was the EU referendum, but also the low level of household savings, high levels of household debt, a wide current account deficit and concerns that productivity growth will not rise significantly.

Concerns about a possible Brexit may have affected UK markets in recent months, according to the IMF.

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

Deciding whether to remain in the EU was a choice for voters to make, the IMF said, adding that "their decisions will reflect both economic and non-economic factors".

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