IMF says 'Brexit' could further weaken euro zone ties

A sign by the roadside near Tunbridge Wells  in Britain, urging people to vote for Brexit in the upcoming EU referendum.
A sign by the roadside near Tunbridge Wells in Britain, urging people to vote for Brexit in the upcoming EU referendum.PHOTO: AFP

WASHINGTON (AFP) - The International Monetary Fund (IMF) warned on Thursday (June 16) that a British vote next week to break with the European Union could stifle economic growth and weaken the ties that bind the euro zone.

In a new report on the euro area, the IMF warned that the 19-nation single-currency bloc already faces rising doubts from within that could loosen its bonds, including from tensions over the refugee crisis and from financial strains.

It said a pro-Brexit vote on June 23 could exacerbate that trend.

"Strong collective actions are needed to allay Euroscepticism and renew faith in the monetary union," the IMF said.

"A 'leave' vote in the UK referendum, or even a close result in favor of remaining, could exacerbate these tensions, contributing to further Euroscepticism and uncertainty," the Fund said.

The IMF later announced it would delay by one day its annual economic report on Britain - which includes an analysis of the consequences of a Brexit vote - after a pro-EU British lawmaker was murdered, throwing campaigning for the EU referendum into disarray a week before the vote.

"Out of respect for today's tragic event in the UK, and with the agreement of the UK authorities, the IMF is delaying by 24 hours the publication of the staff report and the other documents of the 2016 Article IV Consultations," the Washington-based institution said.

The report will not be released at 2300 GMT on Friday.

Earlier, an IMF official said a British vote for exiting the 28-nation European Union would rattle markets and weigh on economic growth.

"A vote for the exit of the EU would precipitate a protracted period of heightened uncertainty, financial markets volatility and slower growth as the UK negotiates its new relationship with the EU," IMF spokesman Gerry Rice said at a news conference.

The IMF has already warned several times about the potential negative impact of a Brexit. In May, Christine Lagarde, the IMF managing director, said that quitting the EU would be "pretty bad to very, very bad" for the British economy.