European Economist Warns U.K. Pound Could Fall to Parity With Dollar - Financial Times

European Economist Warns U.K. Pound Could Fall to Parity With Dollar

Posted: 07 Jul 2016 08:21 AM PDT

A leading economist warned that the pound sterling could slump to the same value as the dollar if lawmakers cannot quickly establish a post-Brexit financial arrangement that involves free trade with the European Union.
Mohamed El-Erian, the chief economic adviser to insurance company Allianz, told Reuters that lawmakers need to come up with a sound Plan B — and they need to do it fast. He made the comments as sterling fell to $1.28 on Wednesday, its lowest point in 30 years. It had been $1.50 on June 23, the day of the referendum.
“After the Brexit referendum, the U.K. has to urgently get its political act together,” El-Erian told Reuters, “‘Plan B’ depends on the politicians in London and across the Channel, but so far they have not stepped up to their economic governance responsibilities.”
International Monetary Fund head Christine Lagarde also discussed the dangers of not moving ahead swiftly in the talks with Brussels.
“Do we have a forecast and scenario with prolonged uncertainty, total lack of clarity, no triggering of Article 50, things staying in limbo for a long period of time?” Lagarde said to theFinancial Times. “No. We don’t have that. We doubt that it would be sustainable politically, geopolitically.”

Donald Trump-Style Protectionism Could Hurt World Economy, IMF Chief Says - TIME

Donald Trump-Style Protectionism Could Hurt World Economy, IMF Chief Says Posted: 07 Jul 2016 10:16 AM PDT Donald Trump’s anti-trade policies and isolationist attitude could have dangerous consequences for the global economy, IMF Managing Director Christine Lagarde warned in an interview with the Financial Times on Thursday. The International Monetary Fund chief said that new trade barriers between countries could add to concerns in the wake of the United Kingdom’s vote to leave the European Union last month. Trump has said he wants to get rid of U.S. trade deals such as the North American Free Trade Agreement, and has suggested tariffs on goods from Mexico and China. “I think it would be quite disastrous, actually. Well I don’t think I should say disastrous because that is an excessive word and I should refrain from excessive words. But it would certainly have a negative impact on global growth,” Lagarde told the Financial Times. Other world leaders criticized Trump’s behavior and his policy suggestions throughout the Republican primary season, but since the New York businessman became his party’s presumptive nominee, many foreign politicians have become more cautious. Lagarde, who is just beginning her second five-year term as head of the IMF, was careful to avoid naming Trump or singling out any specific politician. She did say that policies that go against globalization could create economic problems like those caused by the start of World War I. “I hope it is not a 1914 moment and I hope that we can be informed by history to actually address the negative impact of globalization in order to leverage the benefits that it can deliver. Because it has historically delivered massive benefits and it can continue to do so,” Lagarde said. She did not want to comment on the specifics of the U.S. election but did add that “waves of protectionism” had preceded other wars and that protectionism “hurts growth, hurts inclusion and hurts people.” Trump has taken to using the phrase “America First” and gave his support for Britain’s decision to leave the EU, which many have seen as another sign that he would push forward with similarly isolationist policies.