German Economists Urge EU to Persuade Britain to Halt Brexit

(Bloomberg) -- Germany's leading economists said the European Union shouldn't give up on the U.K. and try to halt Brexit instead.

“Constructive negotiations” might still prevent Britain's departure from the 28-nation union or at least produce “a succession agreement which minimizes the damage for both sides,” the German government's council of economic advisers said in its annual report Wednesday. One of the Brexit risks for Germany is that the EU is poised to lose “one of the most market-oriented member countries,” according to the five-member panel.

The economists' plea runs against the grain of policy in both Berlin and London. Merkel has said the EU needs to face the reality of the Brexit referendum, while Prime Minister Theresa May's government is committed to following through on the popular vote in June.

“One thing is to keep our relationship with Britain good and friendly,” Merkel said on Wednesday as the economists handed over the report at the chancellery. Yet the EU's so-called four freedoms aren't negotiable and the 27 remaining EU members need to present a united front, she said.

Short-term Brexit effects are likely to be moderate and will affect the U.K. more than its partners, though “a sharp collapse” isn't very likely, the economists said. While “concessions to the U.K. on details mustn't be a taboo,” the EU's free movement of people, capital, goods and services are “indispensable,” according to the report.

“There is still a chance to prevent an exit through constructive negotiations,” said the economists, who also urged the European Central Bank to slow down bond purchases and end them sooner than planned.

Merkel has a record of rejecting the academics' annual recommendations. On Wednesday, she dismissed the report's criticism that her government “hasn't made sufficient use of the strong economy of recent years to carry out reforms.”

--With assistance from Patrick Donahue To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net. To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Tony Czuczka, Andrew Atkinson