FALCON POWERS – A study has warned of severe economic damage to Germany if it were to leave the European Union, at a time when the right-wing populist party “Alternative for Germany” (AfD) is calling for reduced integration between Germany and the continental bloc ahead of the European elections. The study, conducted by researchers at the German Institute of Economics (IW) in Cologne and obtained by the German news agency (DPA) (May 19, 2024), states that “Germany’s exit from the European Union would clearly lead to a serious economic crisis and a permanent loss of prosperity for the population in Germany”.
It is worth noting that the far-right AfD party is seeking to reduce European integration, as it believes the European Union should only be an economic and interest-based bloc made up of some loosely connected states. According to the researchers, in the event of Germany’s exit from the European Union, losses are expected to be around 5.6% of real GDP, or the equivalent of around 690 billion euros, after five years. Additionally, approximately 2.5 million jobs could be lost in the fifth year of the exit. The study states that these losses are roughly equivalent to the value-added losses resulting from the COVID-19 pandemic and the energy cost crisis after the Russian attack on Ukraine.
These figures are based on a scenario that occurred in the past, and experts expect that the losses would also be high in a future scenario. In the study, the scientists estimated what would have happened to Germany if it had left the EU at the same time as the UK did. To determine this, they first studied the economic effects of leaving the EU on the UK from the 2016 referendum until 2021, and then transferred these effects to Germany, taking into account the differences between the two countries.
Based on the researchers’ analysis, the potential impact of an actual German exit from the EU is likely to be higher, given Germany’s close ties with other EU member states and its membership in the Eurozone. Regarding the UK, experts have written that the decision to leave the EU has already led to losses in economic growth even before its implementation on January 31, 2020, with the British pound losing value against the euro, making imports more costly.
Researchers also pointed out that uncertainty about future relations with the EU also had a negative impact on investments, and the UK lost the opportunity to achieve trade prosperity within the EU. Although the British government has been able to negotiate new trade liberalization agreements with other countries, these agreements have essentially reproduced the EU’s agreements with the same countries, and therefore no new market access opportunities have been developed.
While two new agreements have been concluded with Australia and New Zealand, the British government expects a very small boost in the long term for economic performance: GDP growth of 0.08% from the agreement with Australia and 0.03% with New Zealand, by 2035. The study’s authors wrote: “These benefits are negligible compared to the losses from the UK’s exit from the EU, which range from 5 to 10% of GDP.”
