Princeton professor: Cost of UK leaving EU overstated
Staff Writer |
The respected Indian economist Ashoka Mody, tells Briefings for Brexit how the long term costs to the British economy of leaving the EU have been overstated.
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Ashoka Mody is Visiting Professor of International Economic Policy, Princeton University and author of “Euro Tragedy: A Drama in Nine Acts†(Oxford University Press). His book has just been judged the best economics book of the year by the American Association of Book publishers.
In this February 4, 2019, exclusive Briefings for Brexit podcast Mody tells us why he believes the EU has failed to keep up with growth in other parts of the developed and developing World and why this has led to protest and anti-establishment movements and the fragmentation of political systems throughout Europe.
While he thinks leaving the EU will result in a “short-term†loss of trade to the UK and a drop in its GDP growth he does not think this will be long lasting.
Mody begins by outlining clearly what is happening to the economic slow-down in Germany and Italy with Germany traditionally being regarded as the “powerhouse†of Europe and Italy a symptom of its “fault linesâ€.
He thinks in the longer term there is a danger that Germany could descend into a second-tier economy as its reliance on the car industry becomes problematic and diesel cars are phased out while electric ones are developed.
In particular he says the EU has not invested in science and technology at the frontier in the way other developing economies have, particularly America.
“Germany is going through a generational change, and while it has been able to reinvent its economy in the past it could descend into a second tier economy. Italy has been in trouble for 20 years, and it is the theatre in which the Euro tragedy is being played out,“ he said.
He pointed out that the single currency and full monetary union had always been problematic and that the ECB (European Central Bank), which administers the single market, has in his opinion not been quick enough in recent years to respond to change, particularly in authorising more Quantitative Easing.
“QE is a half measure and now the ECB has stopped it when the EU economy is about to go into a tailspin. It is in the denial phase, it will deliver half measures that will therefore be ineffective. The ECB is in principle a powerful central bank but it doesn’t act like one so in my judgement over time it has lost credibility,†he said. ■