Disintegration of the EU Would Cause Massive Loss of Prosperity

A disintegration of the European Union would mean a massive loss of prosperity for the member states, finds a study conducted by the ifo Institute and EconPol Europe. Gross domestic product (GDP) per capita would fall by almost 9 percent in Ireland, by 5.2 percent in Germany, by 7.7 percent in the Netherlands, and by 10.2 percent in Belgium. France and Italy would each lose 4.1 percent. Smaller economies such as Malta (19.4 percent), Luxembourg (18.1 percent), and Estonia (11.8 percent) would be hit the hardest.

“Taking transfer payments among EU countries into account, the loss of prosperity would almost double for transfer recipients such as Hungary, Lithuania, and Bulgaria. Net contributors to the EU’s coffers such as Germany and Sweden would lose slightly less. However, the gains for net contributors from the end of transfer payments would be much smaller than their losses if the EU disintegrated,” says ifo researcher Jasmin Gröschl. Germany’s gains would amount to only 0.2 percentage points, compared to a loss of 5.2 percent if all EU agreements were dissolved.

Economists also calculated the effects of a disintegration of just the European single market. Losses in prosperity would be lower for large EU economies such as Germany (3.6 percent), France (3.0 percent), Italy (2.7 percent), and Spain (2.5 percent) than for small EU economies. For Austria, disintegration of the single market would mean a loss in prosperity of 5.6 percent.

By contrast, a disintegration of the EU customs union would have a smaller impact than the disintegration of the single market. Ireland (0.4 percent) as well as the Czech Republic, Luxembourg, Poland, and Slovenia (0.3 percent) would incur the biggest losses in this scenario. Negative effects on other EU countries would be minor compared to today. A disintegration of the eurozone would have negative consequences for all member states. But only Luxembourg (2.5 percent) and Germany (0.7 percent) would face severe repercussions.

This study calculates changes in GDP per capita in EU states as well as in other third countries compared to the base year 2014 for a number of scenarios: complete disintegration of the EU (with and without consideration of transfer payments among the member states); disintegration of the European single market; disintegration of the customs union; dissolution of the Schengen Agreement; as well as dissolution of all existing free trade agreements between the EU and third countries.