Britain’s vote to leave the European Union may dampen global growth, but European fundamentals are strong and the British economy and banking sector are resilient, European financial leaders will tell their counterparts from the biggest economies on Saturday.
Finance ministers and central bank governors from 20 of the world’s biggest economies (G20) are in talks this weekend to discuss global economic issues and Britain’s decision to leave the 28-nation EU, dubbed Brexit, is high on the agenda.
“The results of the UK referendum have increased uncertainty and may weigh on the global economic outlook,” a terms of reference document agreed by EU finance ministers for the G20 meeting said.
“However, our economic fundamentals are strong. We affirm our assessment that the UK economy and financial sector remain resilient,” said the document, obtained by Reuters.
The European position appears aimed at assuaging concerns expressed by the International Monetary Fund in its updated World Economic Outlook on July 19, when the Fund again cut its global economic growth forecast citing uncertainty caused by Brexit.
“The Brexit vote implies a substantial increase in economic, political, and institutional uncertainty, which is projected to have negative macroeconomic consequences, especially in advanced European economies,” the IMF said.
According to the European terms of reference, European ministers will say during the talks that they stand ready “to act to maintain financial stability and support growth.”
They will also call on all of the members of the G20 to put into action a strategy agreed last February to use monetary, fiscal and structural policies to boost confidence and growth without relying to heavily on cheap money from central banks.
The European ministers said in the document that Brexit with its possible negative impact on global growth only underlined the need to accelerate G20 growth strategies.
G20 leaders agreed in 2014 to launch reforms that would boost global economic growth by an additional 2 percent over five years but implementation has been lagging.
The Organisation for Economic Cooperation and Development (OECD), which has the task of monitoring the G20 reforms, said in February that despite progress in tackling some of the main challenges, “the slowdown in the pace of reforms observed in 2013-14 has continued in 2015”.
The G20 should implement the principles for structural reforms and prioritise among the needed reforms according to specific features of individual economies, the European document said.