A British exit from the European Union would have negative effects on Malta, a new report has found.
A comprehensive review of the implications of a Brexit, published yesterday by ratings agency Fitch, listed Malta as one of the “most exposed” countries to a negative fallout from the move.
Ireland, Belgium, the Netherlands, Cyprus and Luxembourg were also listed as vulnerable, because, like Malta, they have strong export ties to the UK.
Fitch found that the Brexit-sensitive countries all exported goods and services at a rate of at least eight per cent of their economy to the British economy.
It would reduce the UK’s contribution to the EU budget, a net €7.1 billion in 2014
“The economic impact of Brexit would be lower for the EU than for the UK but would still be palpable,” the report said.
Malta, along with Belgium and Germany, was also listed as having “significant investment and financial assets in the UK”, which could suffer losses due to currency valuations. This meant the value of those assets in euros would dip if there were a permanent depreciation of the sterling.
The report also noted that Malta’s banking sector, along with those of Ireland, Luxembourg, Spain, France and Germany, had “significant links” to that of the UK.
Giving a more general overview, the Fitch report said that a Brexit would weigh on the economies of other member countries and increase political risks in Europe.
This could ultimately effect Malta’s own credit standings, it added.
“We would not expect to take any immediate negative rating actions on other EU sovereigns if the UK left. But negative actions would become more likely in the medium term if the economic impact were severe or significant political risks materialised,” the report warned.
In a more immediate sense, the report said that a Brexit would reduce the UK’s contribution to the EU budget, a net €7.1 billion in 2014 after rebates, potentially to zero.
This would imply that other net contributors would have to increase payments to the EU or net recipients accept lower EU expenditure.
A Brexit would create a precedent for countries leaving the EU, the report also warned.
Fitch said that this could boost anti-EU or other populist political parties and make EU leaders more reluctant to implement unpopular policies with long-term economic benefits.
Meanwhile, negotiating the terms of the UK’s exit could exhaust the EU’s time and energy, potentially slowing down progress in other priority areas.
And, if the UK were to thrive outside of the EU, it might encourage other countries to follow suit, the report warned.