EU wants a quickie divorce, UK wants time to think things over

By Updated at 2016-06-28 17:32:44 +0000

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I can only advise our British friends not to fool themselves,.. no cherry-picking exercise in UK negotiations to leave the EU, said German Chancellor Angela Merkel.

“We will make sure that negotiations will not be carried out as a cherry-picking exercise. There must be and there will be a palpable difference between those countries who want to be members of the European family and those who don’t,.. I can only advise our British friends not to fool themselves ... in terms of the necessary decisions that need to be made in Britain," she said.

European leaders told Britain on Tuesday to act quickly to resolve the political and economic chaos unleashed by its vote to leave the European Union, a move the IMF said could put pressure on global growth.

Financial markets recovered slightly after the result of Thursday's referendum wiped a record $3 trillion off global shares and sterling fell to its lowest level in 31 years, but trading was volatile and policymakers said they would take all necessary measures to protect their economies.

British finance minister George Osborne, whose attempt to calm markets fell on deaf ears on Monday, said the country would have to cut spending and raise taxes to stabilize the economy after a third credit ratings agency downgraded its debt.

Firms have announced hiring freezes and possible job cuts, dashing voters' hopes the economy would thrive outside the EU.

European countries are particularly worried about the impact on the rest of the EU of the uncertainty created by Britain's vote to leave, with little idea of when, or even if, the country will formally declare it is quitting.

European Commission President Jean-Claude Juncker told the European Parliament before meeting British Prime Minister David Cameron in Brussels that he would urge him to clarify London's position as soon as possible.

But he said he did not expect him to launch the two-year withdrawal process "today, or tomorrow morning".

"We cannot be embroiled in lasting uncertainty," Juncker said in a speech which he interrupted to ask British lawmakers who campaigned to leave the EU why they were there.

Cameron, who offered to resign when it became clear he had failed to persuade the country to stay in the EU in the referendum he called, says he will leave it to his successor to formally declare Britain's exit.

"Britain will be leaving the European Union but I want that process to be as constructive as possible and I hope the outcome can be as constructive as possible," Cameron said on arrival in Brussels for a summit with other EU leaders.

Holding out hope of maintaining good relations with other European countries, he said: "And I very much hope we'll seek the closest possible relationship in terms of trade and cooperation and security. Because that is good for us and that is good for them."

His party says it aims to choose a new leader by early September, but those who campaigned for Britain's leave vote have made clear they hope to negotiate a new deal for the country with Europe before triggering the formal exit process. European leaders have said that is not an option.

"No notification, no negotiation," Juncker said.

"It should be implemented quickly. We cannot remain in an uncertain and indefinite situation," French Finance Minister Michel Sapin said on France 2 television.

Guenther Oettinger, German member of the EU's executive European Commission, said delay would hurt Europe as well as Britain. "Every day of uncertainty prevents investors from putting their funds into Britain, and also other European markets," he told Deutschlandfunk radio.

South Korea said on Tuesday it would propose a supplementary budget of around 10 trillion won ($8.44 billion), in part to help it manage Brexit turmoil in financial markets.

World markets on edge

Brexit vote continued to reverberate through financial markets, with the pound falling to its lowest level in 31 years, despite government attempts to relieve some of the confusion about the political and economic outlook.

UK finance minister George Osborne said early Monday that the British economy was strong enough to cope with the market volatility caused by last week's "Brexit" referendum which has resulted in the biggest blow since World War Two to the European goal of forging greater unity.

"Our economy is about as strong as it could be to confront the challenge our country now faces," Osborne told reporters.

"It is inevitable after Thursday's vote that Britain's economy is going to have to adjust to the new situation we find ourselves in," said Osborne, who later ruled himself out of the running to succeed David Cameron as prime minister.

Boris Johnson, a leading proponent of Brexit and the frontrunner to be the next prime minister, praised Osborne for saying "some reassuring things to the markets".

The former London mayor said it was now clear that "people's pensions are safe, the pound is stable, markets are stable. I think that is all very good news."

But neither Osborne's nor Johnson's words failed to stop the slide in stocks on world markets which began last Friday when Britons confounded investors' expectations by voting to end 43 years of EU membership.

European bank shares had their worst two-day fall on record and world stocks as measured by MSCI index saw their worst two-day fall since the collapse of U.S. investment bank Lehman Brothers during the 2008 financial crisis. On Friday alone about $2.8 trillion was wiped off the value of world stocks, the biggest daily loss ever.

Sterling fell to a low around $1.3120, its lowest level since mid-1985. The euro also remained weak, after falling to a three-month low around $1.0910 on Friday.

Asian stocks markets opened weaker on Tuesday, with MSCI's Asia ex-Japan index extending losses for a third day, down 0.5 percent. Japan's Nikkei was off 0.7 percent.

"Markets already appear to be pricing in a full-blown recession in the U.K. and rising recession risk in the rest of Europe," said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management.

Ratings agency Standard & Poor's stripped Britain of its last remaining top-notch credit rating on Monday, warning that more downgrades could follow.

"In our opinion, this (referendum) outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK," S&P said in a statement.

The yield on British 10-year government bonds fell below 1.0 percent for the first time as investors bet the Brexit vote would trigger a Bank of England interest rate cut aimed at steadying the economy.

U.S. stocks ended lower for a second day also, following European markets, pulled down by banking stocks amid uncertainty over London's future as the region's financial capital. Safe-haven bond and gold prices rose.


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