LONDON, (Reuters) – Britain has voted to leave the European Union, forcing the resignation of Prime Minister David Cameron and dealing the biggest blow since World War Two to the European project of forging greater unity.
Global stock markets plunged yesterday, and the British pound saw its biggest one day drop in history, as results from a referendum defied bookmakers’ odds to show a 52-48 percent victory for the campaign to leave the bloc Britain joined more than 40 years ago.
The United Kingdom itself could now break apart, with the leader of Scotland, where nearly two-thirds of voters wanted to stay in the EU, saying a new referendum on independence from the rest of Britain was “highly likely”.
German Chancellor Angela Merkel will meet French, German and Italian leaders in Berlin on Monday to discuss future steps, and the foreign ministers of Germany, France, Italy, Belgium, the Nether-lands and Luxembourg, will meet this morning.
U.S. President Barack Obama yesterday tried to limit the fallout from Britain’s vote to leave the European Union which threatens to harm the U.S. economic recovery and distract U.S. allies from global security issues. Obama, who had argued passionately against the UK leaving the EU in a trip to the Britain this year, vowed that Washington would still maintain both its “special relationship” with London and close ties to Brussels.
In an emotional speech yesterday, UK Prime Minister Cameron, who led the campaign to remain in Europe to defeat, after promising the referendum in 2013, said he would leave office by October.
“The British people have made the very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction,” he said in a televised address outside his residence.
“I do not think it would be right for me to be the captain that steers our country to its next destination,” he added, choking back tears before walking back through 10 Downing Street’s black door with his arm around his wife Samantha.
The British pound fell as much as 10 percent against the U.S. dollar yesterday to levels last seen in 1985 on fears the decision could hit investment in the world’s fifth-largest economy, threaten London’s role as a global financial capital, and usher in months of political uncertainty. The euro slid 2.0 percent against the U.S. dollar.
World stocks saw more than $2 trillion wiped off their value. European stocks ended down 7.0 percent, the biggest one day fall since 2008. U.S. stocks fell suffered the largest selloff in ten months sharply, with the Dow Jones industrial average losing 3.4 percent.
Investors rushed to put their cash in the safety of gold which clocked up its biggest daily gain the global financial crisis of 2008, ending yesterday up 5.0 percent at $1,315 an ounce.
Quitting the world’s biggest trading bloc could cost Britain access to the trade barrier-free single market and means it must seek new trade accords with countries around the world. A poll of economists by Reuters predicted Britain was likelier than not to fall into recession within a year.
The EU arose out of the ashes of two world wars to unite a continent and now faces the challenge of maintaining economic and political unity without Britain, which has the EU’s biggest financial centre, a U.N. Security Council veto, a powerful army and nuclear weapons.
“It’s an explosive shock. At stake is the break-up pure and simple of the union,” French Prime Minister Manuel Valls said. “Now is the time to invent another Europe.”
German Chancellor Angela Merkel called the “Brexit” vote a watershed for European unification.
The result emboldened eurosceptics in other EU member states, with French National Front leader Marine Le Pen and Dutch far-right leader Geert Wilders demanding their countries also hold referendums. Le Pen changed her Twitter profile picture to a Union Jack and declared “Victory for freedom!”
The British vote will trigger at least two years of divorce proceedings with the EU, the first exit by any member state. Cameron, in office since 2010, said it would be up to his successor to formally start the exit process.
His Conservative Party rival Boris Johnson, the former London mayor who became the most recognisable face of the Leave camp, is now widely tipped to seek his job.
“We can find our voice in the world again, a voice that is commensurate with the fifth-biggest economy on earth,” he told reporters at Leave campaign headquarters.
Lawmakers from the opposition Labour Party launched a no-confidence motion to topple their leader, leftist Jeremy Corbyn, accused by opponents in the party of campaigning tepidly for its Remain stance.
There was euphoria among Britain’s eurosceptic forces, claiming a victory over the political establishment, big business and foreign leaders including U.S. President Barack Obama who had urged Britain to stay in Europe.
“Let June 23 go down in our history as our independence day,” said Nigel Farage, leader of the eurosceptic UK Independence Party, describing the EU as “doomed” and “dying”.
The political and economic shock hits a European bloc already reeling from a euro zone debt crisis, unprecedented mass migration, and confrontation with Russia over Ukraine. Support for anti-immigrant and anti-EU parties has surged across the continent recently.
U.S. presidential candidate Donald Trump, whose own rise has been fuelled by similar anger at the political establishment, called the vote a “great thing”. Britons “took back control of their country”, he said in Scotland where he was opening a golf resort. He criticised Obama for telling Britons how to vote, and drew a comparison with his own campaign.
Obama said he had spoken with Cameron and that the United States’ relationship with Britain would endure.
“While the UK’s relationship with the EU will change, one thing that will not change is the special relationship that exists between our two nations,” he said in a speech.
Britain has always been ambivalent about its relations with the rest of post-war Europe. A firm supporter of free trade, tearing down internal economic barriers and expanding the EU to take in ex-communist eastern states, the UK opted out of joining the euro single currency and the Schengen border-free zone.
Cameron’s ruling Conservatives in particular have harboured a vocal anti-EU wing for many years, and it was partly to silence such figures that he called the referendum.
The 11th hour decision of Johnson, Cameron’s schoolmate from the same elite Eton private boarding school, to come down on the side of Leave gave the exit campaign a credible voice.
World leaders including Obama, Merkel and Chinese President Xi Jinping, as well as NATO and Commonwealth governments, had all urged a “Remain” vote, saying Britain would be more influential in the EU.
The four-month campaign was among the most divisive ever waged in Britain, with accusations of lying and scare-mongering on both sides and rows over immigration which critics said at times unleashed overt racism.
At the darkest hour, a pro-EU member of parliament was stabbed and shot to death in the street. The suspect later told a court his name was “Death to traitors, freedom for Britain”.
The campaign revealed deep splits in British society, with the pro-Brexit side drawing support from voters who felt left behind by globalisation and blamed EU immigration for low wages.
Older voters backed Brexit but the young and well educated mainly wanted to stay in the EU. London and Scotland supported the EU, but swathes of England that have not shared in the capital’s prosperity voted to leave.
Support for Remain among Scots prompted Scottish First Minister Nicola Sturgeon to declare it “democratically unacceptable” for Scotland to be dragged out of the EU, two years after voting to stay part of the United Kingdom. “I think an independence referendum is now highly likely,” she said.
The financial market volatility comes at a time when interest rates around the world are already at or near zero. The vote could prevent the U.S. Federal Reserve from raising interest rates as planned this year or even provoke a new round of emergency policy easing from central banks.
Left unclear is the relationship Britain can negotiate with the EU with officials warning UK-based banks and financial firms could lose automatic access to sell services in Europe.
Ratings agency Moody’s said Britain’s creditworthiness was now at greater risk after voting to leave the European Union, as the country would face substantial challenges to successfully negotiate its exit from the bloc.
Huge questions also face the large numbers of British expatriates who live and work freely elsewhere in the EU as well the fate of EU citizens who live and work in Britain.