Ireland’s Central Bank Governor Gabriel Makhlouf has warned that the country will be the eurozone’s biggest loser in the event of a no-deal Brexit with an economic “double whammy” set to hit the country.
As talks resume between the UK and the EU, Makhlouf presented a bleak outlook for Ireland’s economic future if no Brexit deal is agreed by the end of this year, as he laid out how the country could see two percent knocked off its economic growth, with the nation’s agriculture and food sectors set to be hit the hardest if new tariffs are implemented.
With Ireland currently facing a rapidly increasing number of coronavirus cases and implementing some of the strictest restrictions in Europe, Makhlouf warned that a no-deal Brexit would compound the financial impact of the virus to create an economic “double whammy.”
An “acrimonious” Brexit could have further ramifications for Ireland, if Britain proceeds with its plans to override parts of the Withdrawal Agreement, which had been agreed to avoid creating a hard border between Northern Ireland and the Republic of Ireland. A hard border would cause political tensions between the two countries, as well as creating issues around export documentation and state aid.
Beyond the impact on Ireland, Makhlouf warned of potential changes to Europe’s financial services sectors. While he stated that most countries “would rather” London remain the dominant city, with a no-deal Brexit, that title is likely to move to Amsterdam, Dublin, Frankfurt or Paris. Makhlouf highlighted how Ireland could look to take advantage of this situation by making itself more attractive, compared with the UK, to companies that want to set up a base from which to do business with the EU. Any Brexit deal that is agreed by the end of the year would have little impact on this, as the current negotiations do not include discussions about financial services.
The UK currently accounts for 10 percent of Ireland’s overall exports and 38 percent of the country’s exports for agricultural and food products. If trade barriers are implemented following a no-deal Brexit, the Irish government has estimated that this could put tariffs of between €1.35 billion and €1.5 billion on the country’s exports to the UK.
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