Brexit ‘not a big deal’ for Europe, says ex-Bank of England governor,
Brexit is no “big deal for the rest of Europe”, the former governor of the Bank of England told an audience in Dubai yesterday.
Mervyn King told the Arab Strategy Forum that Britain’s handling of its withdrawal from the EU was another example of “the political classes being unable to cope with the concerns of ordinary people”.
Mr King insisted Britain’s vote in June 2016 to leave the EU was not a high priority for European countries, which faced significant problems of their own.
“It is impossible to predict what’s going to happen with Brexit,” Mr King said during a panel discussion on the state of the world economy. “The UK was not prepared for this.”
Mr King, who was governor of the Bank of England from 2003 to 2013, said that Brexit was a political rather than an economic issue.
The life peer made headlines when he called Mrs May’s withdrawal arrangement “incompetence of a high order”. He argued that no coherent plan had been presented.
Yesterday, Mr King said the problems facing European countries included the outlook for the global economy and rising national debt.
“The world looks incapable of getting back to the higher interest rates of before 2008. The underlying cause of debt had previously been too much borrowing and spending,” he said.
“You just have to look at China, where they decided to build infrastructure projects to help their economy but were incapable of paying back the loans on the infrastructure. There is no easy way out.”
Dr Nasser Saidi, a former Lebanese minister of economy and trade, also warned of the real and impending risk of economic instability.
“There is a risk of a financial crisis in 2019 that makes a recession likely,” Dr Saidi said. “There is going to be an economic tightening.”
He said the GCC’s attempts to diversify the local economy away from oil had to be a priority for the region.
“The oil model is in the past and we have to embrace renewable energy sources,” Dr Saidi said. “The days of hoping that oil will go back to $200 [Dh734] a barrel are long gone.
“We have the wind and the sun that we need in the GCC for renewable energy. There will come a day when we export the last barrel of oil and we have to be ready.”
Experts have predicted that a barrel of crude oil will average between $55 and $65 next year.
Dr Saidi said the GCC would do well to heed the advice of the International Monetary Fund, which has warned countries in the region that they “cannot keep doing what they are doing” – relying on oil.
Dr Mahmoud Mohieldin, senior vice president of the World Bank Group, said fractured relations between the world’s leading countries could make next year more difficult than the fallout from the 2008 crash.
“International co-operation is not in good shape, which is going to create further problems,” Dr Mohieldin said.
He urged the region to embrace new ways of preparing its economy for any downturn next year.
“Artificial intelligence is an area we need to heavily invest in,” Dr Mohieldin said. “Arab countries do not have an infrastructure of producing technology. We are huge consumers of technology but we are not producers.”