Lane believes UK and EU will agree deal to avoid ‘chaotic Brexit’

Central Bank of Ireland governor Philip Lane believes the UK and the European Union will eventually agree on a withdrawal deal, with a long transition period, avoiding a chaotic crash out of the bloc.

“The incentive for the UK to accept a version of the current deal is very strong,” he told an event in Hong Kong.

The UK is on course to leave the EU on March 29th without a deal unless prime minster Theresa May can convince the bloc to amend the divorce deal she agreed in November and then convince MPs to support it.

In his speech, Mr Lane cautioned that the European Central Bank (ECB) should not “overreact”to recent economic data signalling a slowdown in activity in Europe.

Mr Lane said while the Frankfurt has acknowledged a shift to the downside in recent weeks, the domestic euro-area economy remains “pretty strong”.

Eurogroup finance ministers on Monday backed Mr Lane’s candidacy to be the next ECB chief economist. He will take over from incumbent Peter Praet in June.

Governments will then make the final appointment when EU leaders gather in Brussels for a summit in March, after consultations with the European Parliament and the Governing Council of the ECB.

“So we will have new comprehensive forecasts in March and at that point I think the ECB can decide where next,” Mr Lane. He later added that remark was “no signal whatsoever about decision making.”

His caution about overreacting to recent data echoes that of ECB vice president Luis de Guindos, who said on Monday that many of the factors signaling a slowdown in the 19-nation currency bloc were temporary in nature. Manufacturing across the region has slumped and business sentiment is subdued, adding to fears that the global economy is slowing sharply in the first few months of 2019.

“It is even more important during these periods to make a close study of the data because what we have is I think different signals,” Mr Lane said. “It is early days in 2019, we have to not over react to any particular announcement or new data release and really take a measured approach to all of the data,” he said. – Bloomberg

Source: Irish Times

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