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Migrant crisis 'shaking confidence' in the EU

Published 10/06/2016

The OECD predicts the referendum result will have a big impact on the economic prospects of the UK and the rest of Europe
The OECD predicts the referendum result will have a big impact on the economic prospects of the UK and the rest of Europe

The result of the June 23 referendum on Britain's EU membership will have "important implications" for the economic prospects not only of the UK, but of the rest of the continent, an international economic thinktank has warned.

The OECD (Organisation for Economic Co-operation and Development) identified the referendum as one of the challenges facing the EU as it continues its recovery from the recession and eurozone crisis.

And it warned that the migrant crisis was "shaking confidence" in the EU as a whole, and was likely to cost the 28-nation bloc as much as 0.2% of its £11 trillion GDP - or around £20 billion - in 2016.

The OECD has previously warned that Brexit would be "a major negative shock to the UK economy" with "economic fallout" for the rest of the EU.

In new economic surveys of the EU and eurozone, it took a more restrained tone in warning: "The outcome of the upcoming referendum in the United Kingdom could have important implications for economic performance in both the United Kingdom and the rest of Europe."

The survey found that the EU has made "important progress" in recovering from recession and improving its ability to manage future shocks like the 2008 crash. But it warned that "many legacies of the crisis are still unresolved", including high unemployment rates, while investment remains "far below 2007 levels".

Confidence in the European project " has recovered from its lows in 2013, although it is still well below what it was before the crisis".

The report also warned of a flare-up of political tensions due to the large influx of refugees, and warned that the reintroduction of border controls in some parts of the Schengen free movement area is a "setback for European integration". Disruption to the free movement of goods and labour as a result would "to some extent undo the benefits of the single market and shake confidence in the European Union more generally", it said.

The financial burden relating to the surge of refugees, including financial support on arrival and integration into the labour market, was estimated at 0.1%-0.2% of EU GDP in 2016, but as high as 0.9% in Sweden.

The OECD forecast "modest" growth in EU GDP to 2%, with inflation edging up to 1% by 2017.

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