Peter Orszag, the former Obama administration official who joined investment bank Lazard this year, said government leaders are poorly equipped to counter the economic disruption that would follow if UK voters decide to break from the European Union.
“Policy makers around the world, including in Europe and in the US, don’t have the full array of tools that we had available to us in the great financial crisis,” Orszag said in a Bloomberg Television interview. “It’s not just the direct impact, it’s our firefighting tools,” he said. “The water level’s low in the firetruck.”
Global stocks have surged this week as investors bet that momentum in the countdown to today’s UK referendum was swinging in favour of “Remain.” Last week, stocks fell as polls showed “Leave” ahead and business leaders warned that a Brexit could disrupt trade.
“There certainly is a big potential for big problems,” with a Brexit, said Orszag, who is also a Bloomberg View columnist.
Orszag joined Lazard from Citigroup, where he was vice chairman of corporate and investment banking. He was director of the Congressional Budget Office for President Barack Obama, and was previously a special assistant to president Bill Clinton for economic policy.
He joins Allianz’s Mohamed El-Erian in lamenting how government officials have fewer resources to restore growth. Central banks already have set interest rates near record lows. And elected officials are “stymied” from making necessary economic fixes, Orszag said.
“We’re back in this world of hyper polarisation,” he said. “People are frustrated, they’re mad, and that means we’re not getting the kind of policy reactions that could make us all better off.”