EU membership strengthens economic 'dynamism': Bank of England

[LONDON] Britain's membership of the European Union reinforces the country's economic "dynamism" but leaves it more exposed to financial shocks, Bank of England governor Mark Carney said Tuesday.

Carney expressed the view in a letter to the head of the Treasury Select Committee before facing questions from the cross-party panel of lawmakers on Britain's relationship with the EU ahead of June's referendum on whether the country should remain part of the bloc.

The Canadian national wrote that "membership reinforces the dynamism of the UK economy", according to a copy released by the bank.

He added: " A more dynamic economy is more resilient to shocks, can grow more rapidly without generating inflationary pressure or creating risks to financial stability and can also be associated with more effective competition".

At the same time, Carney stressed that "increased economic and financial openness means the UK economy is more exposed to economic and financial shocks from overseas" and that in recent years closer integration with the EU and eurozone might have increased "challenges to UK economic and financial stability".

Later addressing MPs, Carney insisted that his comments were not a recommendation for remaining part of or leaving the EU.

On Monday, the Bank of England said it would make extra cash available to banks around the time of the referendum.

It is aimed at helping the financial industry to keep ticking over during possible periods of market turbulence or when there might be a risk of a "credit crunch" - a reduction in the availability of loans that can worsen an economic downturn.

Currency markets have already been rocked by fears that Britain could leave the 28-member bloc, with the pound sterling dipping to near a seven-year low against the dollar last month.

Carney was Tuesday facing questions from MPs on the "economic and financial costs and benefits of UK's EU membership".

Opinion polls show that the campaign to remain within the EU is slightly ahead, but its lead over the "leave" campaign has narrowed in recent months ahead of the June 23 referendum.

AFP