IMF warns over Brexit and 'fraying' EU integration

[WASHINGTON] The International Monetary Fund warned Tuesday of potentially "severe" economic damage from a British exit from the European Union and voiced strong worries over generally deteriorating support for EU integration.

"Across Europe, the political consensus that once propelled the European project is fraying," said IMF chief economist Maurice Obstfeld.

"One manifestation is the real possibility that the United Kingdom exits the EU, damaging a wide range of trade and investment relationships."

Mr Obstfeld said the continent's refugee crisis and the danger of more terror attacks were a major source of risk to the already weak European economy.

But together they have stoked "a rising tide of inward-looking nationalism" and fed a broader global backlash against economic integration that "threatens to halt or even reverse the postwar trend of ever more open trade."

The remarks came in Mr Obstfeld's introduction to the IMF's newest assessment of global economic prospects, which also warns strongly about the threat of rising protectionism.

The IMF World Economic Outlook cut its forecast for 2016 world growth to a sluggish 3.2 per cent and warned that further deterioration could raise the threat of recession.

Among key threats were countries turning inward away from more cooperation and integration.

It said Brexit - which the British public are voting on in a referendum on June 23 - "could do severe regional and global damage by disrupting established trading relationships."

AFP