The International Monetary Fund on Sunday urged Britain and the European Union to reduce the risks in the wake of Britain’s referendum to leave the EU.
“At this point, policymakers both in the UK and in Europe are holding that level of uncertainty in their hands and how they come out in the next few days is really going to drive the direction in which risk will go,” IMF Managing Director Christine Lagarde told a forum at the Aspen Ideas Festival in the US state of Colorado, Xinhua reported.
Following a decision to exit the EU, Britain would need to negotiate the terms of its withdrawal and a new relationship with the EU.
Lagarde said the IMF “will continue to encourage the parties involved to actually proceed with this transition in the most efficient, predictable way in order to reduce the level of uncertainty,” which will determine the level of future risks.
The IMF was continuing to monitor the development closely and stood ready to support its member countries as needed, Lagarde added.
In a statement released on Friday in the wake of Britain’s referendum, the IMF chief urged Britain and the EU authorities to work collaboratively to “ensure a smooth transition to a new economic relationship between the UK and the EU,” including by clarifying the procedures and broad objectives that will guide the process.
Financial markets “vastly underestimated” the outcome of Britain’s vote to leave the European Union but did not panic on Friday, she said, according to a report by Reuters.
Lagarde told the forum that central bankers “did their job” by ensuring that ample liquidity was available, and policymakers worked to reassure market participants that the “situation was under control. And it was under control.”
“There was a violent, brutal, immediate massive move, the pound went down by 10%,” Lagarde said. “But there was no panic and the central bankers did the job that they were prepared to do just in case, which was to put a lot of liquidity on the markets.”
The IMF had warned before the referendum that the British economy could shrink 0.8% in 2017 if it leaves the EU.
Spillover from the British exit would be felt mostly by EU countries that have close trade and investment links with the country, including Ireland, Cyprus, Malta, the Netherlands and Belgium, according to a report released by the IMF earlier this month.
