Britain’s assumption that it will retain full access to European Union markets if it leaves the 27-nation bloc is unrealistic, said Nobel economics laureate Christopher Pissarides.
The expectation in the U.K. “is that Britain can continue to have free trade relations with Europe” yet “be outside the union in terms of the budget, in terms of political decisions,” Pissarides said in an interview with Bloomberg Television today in Davos. “I don’t think that’s a very realistic view.”
The comments came after Prime Minister David Cameron promised a referendum by the end of 2017 on whether the U.K. should leave the EU, describing British backing for the status quo in Europe as “wafer thin.” Cameron was responding to calls by lawmakers in his Conservative Party for looser ties with the bloc or an outright departure.
European leaders have rejected his demands to renegotiate membership terms.
Switzerland and Norway have such access “but they are small countries and they’re just going along with the European decisions,” Pissarides said. “They’re not too concerned about the politics, they don’t want to be world leaders, they don’t have special relationships with the U.S.”
President Barack Obama told Cameron last week that the U.S. “values a strong U.K. in a strong European Union,” according to a White House readout of a call between the two leaders.
Pissarides, a professor at the London School of Economics, also said he doesn’t expect a global currency war anytime soon.
“The chances we’re going to get a currency war are very very small,” he said. “There might be more pressure on China to appreciate, and that could bring some retaliation. But China is appreciating little by little, so I don’t see it as too serious a concern.”