February 26, 2016 / 8:31 AM / 2 years ago

Sterling's fall shows EU referendum 'no parlour game' - Osborne

LONDON (Reuters) - Leaving the European Union would be a “profound economic shock” for Britain and this week’s drop in the value of its sterling currency drives home the real-world consequences of the “In-Out” debate, Chancellor of Exchequer George Osborne said on Friday.

Britain is gearing up for a June 23 referendum on whether to stay in or withdraw from the 28-member EU, and the pound has fallen to seven-year lows against the dollar this week due to worries about what “Brexit” would mean.

“You’ve seen the value of the pound fall and it reminds us all that this is not some political parlour game,” Osborne told BBC News during a visit to China, where he is attending a meeting of finance ministers from Group of 20 nations.

“This is about people’s jobs and their livelihoods and their living standards and in my judgment, as chancellor, leaving the EU would represent a profound economic shock for our country.”

The government’s official position, announced by Prime Minister David Cameron on Saturday after he returned from a summit in Brussels where he secured changes to Britain’s terms of membership, is to campaign for the country to stay in the EU.

Osborne, one of Cameron’s closest allies and a leading contender to succeed him, is firmly in the “Remain” camp. But the ruling Conservative Party is deeply split on the issue and six cabinet members will campaign for Britain to withdraw.

In a blow to Cameron, his immediate predecessor as Conservative leader and erstwhile mentor, Michael Howard, came out on Friday in favour of Brexit.

But the most prominent Conservative figure to throw his weight behind the “Leave” campaign is popular London Mayor Boris Johnson, who is also seen as a likely contender to replace Cameron as Conservative leader and prime minister.

Johnson’s chief economic adviser, Gerard Lyons, criticised Osborne’s comment about sterling’s decline.

“I don’t think it helps when your finance minister starts to say things that seem to be pro-cyclical, i.e. feeding the problem,” Lyons told reporters in London in answer to a question about the risks that Brexit posed for sterling.

“You don’t want to be talking the pound down for short-term political gain,” he said during a question-and-answer session after a presentation on the case for Brexit.

Lyons’ comment on Osborne echoed criticism that has been widely levelled at Johnson since he announced his decision on Sunday to campaign for Brexit.

That stance has been seen by many critics, especially those in British politics and media who are on the “Remain” side, as a calculation to position himself to replace Cameron in the event that the “Leave” camp wins the referendum.

Lyons denied this, saying Johnson’s stance was “very genuine”.

“He confronted these issues, the pros and cons, quite considerably in recent weeks, in recent months ... He made it clear this is about sovereignty,” Lyons said. “I don’t see why everyone seems to think this is about the leadership of the Conservative Party.”

Additional reporting by Andy Bruce; Editing by Mark Heinrich

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