By Joseph Nasr

BERLIN (Reuters) - The best outcome of Brexit negotiations between Britain and the European Union would be to keep the country in the bloc, a committee of academic advisers to the German government said in a report on Wednesday.

The Council of Economic Experts said the biggest threat to the EU from Britain's departure was the political fallout.

"An exit of the United Kingdom from the EU would not only mean an economic loss, but above all a bigger political loss," they wrote in their report. "The best outcome of the upcoming negotiations would therefore be if a Brexit could be averted."

Speaking at a news conference after handing the report to German Chancellor Angela Merkel, Council chairman Christoph Schmidt said Britons' vote in June to leave the EU had had little economic effect on Germany so far, but that the long-term economic effects were hard to identify.

"Regarding Brexit, we see hardly any economic effects (on Germany) in the short term; of course we see the biggest (impact) on the United Kingdom itself," he said.

The panel of five experts said in its report that Britain should not be allowed to "cherry-pick" which of the "four freedoms" that underpin the EU's internal market it wanted to respect, as this would threaten the political stability of the bloc.

Merkel told a separate news conference after receiving the report that the negotiations should cause as little friction as possible within the bloc.

She added that the four freedoms should be the basis of negotiations with Britain on its exit from the union.

"In negotiations with Britain, there should be as little friction as possible for the EU," Merkel said.

The four freedoms guarantee free movement of people, goods, services and capital.

British Prime Minister Theresa May has said she wants to secure the best trade deal possible with the EU, with access to the single market, while also being able to restrict immigration from EU countries.

(Additional reporting by Michael Nienaber; Editing by Kevin Liffey)