Wednesday 17 July 2019

Varadkar expects UK to leave EU with deal but Ireland 'continues to prepare for all Brexit outcomes'

Sudden no-deal Brexit 'very severe' for Irish economy – Philip Lane

Leo Varadkar Photo: PA
Leo Varadkar Photo: PA
Ellie Donnelly

Ellie Donnelly

With 44 days to go until the UK leaves the European Union, Taoiseach Leo Varadkar has said he believes a deal will be reached between the two.

However, he added that Ireland would continue its preparations for all possible outcomes, including a no-deal scenario.

Opening the European Financial Forum in Dublin today, Mr Varadkar also said that Ireland is open to investment, to capital, to trade, to talent and to creativity.

"Our philosophy is to be a leader when it comes to emerging economic, social and technological developments," he said.

Central Bank Governor Philip Lane. Photo: PA
Central Bank Governor Philip Lane. Photo: PA

"At a time when attitudes to globalisation, free trade and multilateralism are hardening in much of the world, Ireland is holding firm to liberal political and economic values and policies."

Meanwhile, the Governor of the Central Bank, Philip Lane, warned that a sudden no-deal Brexit will be "very severe" for the Irish economy.

Addressing the forum, Professor Lane said that if the UK leaves the European Union without a deal on March 29, there would be immediate disruptive effects that would permeate almost all areas of economic activity.

"The agri-food sector would be disproportionately affected, with a corresponding outsized impact on rural regions, especially near the Border."

"Our modelling work suggest that a disorderly Brexit could reduce the growth rate of the Irish economy by up to four percentage points in the first year," Professor Lane said.

However, he added that the immediate cliff-edge risks of a hard Brexit have been "largely addressed", because the work that the Central Bank and others have undertaken.

These include the temporary permission by the European authorities for the UK central securities depository (CSD) to continue to serve Irish securities during the transition to an alternative EU27 CSD arrangement and legislation to provide a temporary run-off regime that will protect insurance customers.

"In terms of financial stability risks, our assessment is that the improvements in the resilience of the financial system over the last decade provide a vitally-important buffer."

"Taken together, the more balanced macroeconomic profile, the restructuring of the Irish banking system, the much-higher capital and liquidity ratios, the decline in the non-performing loan ratio and the more intrusive supervisory regime mean that the capacity to absorb negative shocks is much greater than in the past," he added.

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