Bavaria’s economics minister Hubert Aiwanger said his state is keeping a close eye on Brexit updates in anticipation for a disorderly exit, which he claims could erupt a devastating impact on the German economy. The Munich Economic Institute ifo has already predicted how expensive a hard Brexit could become for the Bavarian economy, with the group forecasting the state could see around £1.2 billion (€1.4 billion) less economic output per year. Speaking this week, Mr Aiwanger shared these fears as he warned: “We take the development very seriously. “We see damages heading for the Bavarian economy that are worth billions, if there is no order.”
Economist Gabriel Felbermayr from the Kiel Institute for the World Economy is also predicting more than a billion pounds could be lost if a hard Brexit takes place.
He said: “And in such a worst-case scenario, there would be damages to the Bavarian economy worth up to 1.4, perhaps 1.8 billion euros…“
Bavaria has a particular interest in Brexit as Britain is the fourth largest export market for the German state, which especially makes cars and planes to be sold to the UK.
Investors have breathed a sigh of relief on the the latest Brexit developments as Prime Minister Theresa May secured a delay to Britain cutting ties with the bloc.
The new deadline for Britain leaving has been set for October 31, with traders viewing this as a greater opportunity for Parliament to thrash out the final details of the withdrawal agreement.
The delay sent German investor morale higher, improving for the sixth month in a row due to more time to work out Brexit, according to a survey released today.
The ZEW research institute said its monthly survey showed economic sentiment among investors improved to 3.1 from -3.6 in March.
Economists had expected a smaller increase to 0.8.
A separate gauge measuring investors’ assessment of the economy’s current conditions fell to 5.5 from 11.0 in the previous month.
Markets had predicted a dip to 8.0.
However, the growth outlook for Europe’s largest economy remains clouded by external risks.
The German government is expected to slash its 2019 growth forecast later this week as exporters struggle with weaker demand from abroad and trade tensions with the United States.
Chancellor Angela Merkel’s government will update its growth forecasts for this year and next on Wednesday.
ZEW President Achim Wambach said the slight improvement in economic sentiment was largely based on the hope that the global economy would develop less poorly than previously assumed.
He said: “The postponement of the Brexit deadline may also have contributed to buoy the economic outlook.”
Recent German data has painted a mixed picture of the economy, as industrial orders tumbled and manufacturing output stagnated in February while construction boomed and retail sales rose more than expected in the same month.