IMF’s Lagarde reveals the unintended consequences of Brexit

Britain’s exit from the European Union has not only revitalized current members but it has also inspired countries outside of the bloc to apply for membership, the International Monetary Fund’s managing director, Christine Lagarde told CNBC Tuesday.

“It’s quite fascinating to see this sort of parallel track of those existing members of the EU suddenly being revitalized, rejuvenated and re-encouraged in the face of what they regarded as the adversity of one member wanting to jump ship,” Lagarde said on Tuesday.

Britain narrowly voted to leave the EU in a referendum on June 23 last year, an event that shocked financial markets as well as commentators across the globe. Meanwhile, formal talks between the U.K. and EU’s negotiators kicked off in June this year shortly after British Prime Minister Theresa May failed to increase her parliamentary majority in a snap general election.

 British and EU leaders now have just over a year and a half to negotiate and agree a deal, which will then go to a vote before the European Parliament.

When asked whether countries such as Serbia and Montenegro – both of whom are hoping to become members of the EU – could endanger the future of the bloc, Lagarde stressed the EU had been reinvigorated by the Brexit vote.

‘An aspiration and an inspiration’

IMF’s Lagarde: How countries in Europe are anchored by the EU

IMF’s Lagarde: How countries in Europe are anchored by the EU  

Speaking on the sidelines of an international banking conference in Dubrovnik, Croatia, Largade argued the European project was “clearly alive, kicking, an aspiration and an inspiration” for many countries in the EU.

“At the same time, some of these non-EU members aspiring to join (are) wanting to accelerate the process. I think that is a very strong sort of double positive message,” Lagarde told CNBC.

Last month, Lagarde suggested it would be best for the U.K. economy to prioritize a predictable exit from the EU rather than a “crash situation”.

In April, the Fund warned that the unpredictability surrounding Brexit posed a risk to global financial stability. It forecast at the time, the U.K. economy would expand 2 percent in 2017, before gross domestic product (GDP) declines to 1.5 percent in 2018.

However, the institution is unable to calculate precisely how the British economy will suffer from Brexit because it has still to define its future arrangements with the EU.

— CNBC’s Silvia Amaro and Karen Gilchrist contributed to this report.

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