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Statement on the result of the Brexit referendum

The Brexit decision is a catastrophe for all Europeans. The economic costs will be enormous for all of Europe. Britain could slide back into recession. We at DIW Belin expect a 0.5 percentage points lower economic growth in Germany in 2017 as a result of lower German exports to the UK alone. The risk is highest for countries such as Italy, which are vulnerable and could slide even deeper into the financial crisis.
I expect major volatility in financial markets in the short-term and a slowdown in the global economy over the medium-term, while a renewed intensification of the financial crisis is likely.
I expect a strong signal from the leading central banks in order to stem the panic in financial markets. The depreciation of the euro and decline of equity markets show that Europe will be the main victim of the referendum after the UK.
The referendum has caused a deep division of British and European citizens. It has not triggered a constructive dialogue about Europe, but has compromised Europe’s values. Greek Prime Minister Papandreou had to step down in 2011 for calling a referendum on a rescue program for Greece. Prime Minister Cameron has delivered a huge disservice for Europe and his own country. Prime Minister Cameron has caused enormous damage by calling the referendum, which is much larger than that of the referendum Prime Minister Papandreou called in 2011.
Calling the referendum on EU membership was the biggest mistake of a British government in decades. There are no winners, only losers from Brexit. Europe is a loser from as its values have been betrayed and its future weakened. Britain is a loser as it has gained nothing and caused economic damage. It will not be easier, but much more difficult in the future for Britain to defend its interests in Europe as a result of the referendum.
The heads of state and government of Europe, and first and foremost Germany, now have to push ahead with reforming Europe. Europe’s politicians should understand the current crisis as a wake-up call to lead Europe back onto a sustainable future path.

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