EU seeks to minimise ‘period of uncertainty’ over Brexit

Germany, France and Italy say there will be no informal or formal talks on Britain's exit until it formally applies to leave.

Former London mayor Boris Johnson, a proponent of Britain leaving the European Union and a frontrunner to succeed David Cameron as prime minister, leaves his home in London on June 27, 2016. Jack Taylor / Getty ImagesShow less

Berlin // The leaders of Germany, France and Italy on Monday vowed “a new impulse” for the European Union as it reels from Brexit and told London they would make no deals before it formally informs Brussels it will leave the bloc.

The warning by the three EU powerhouses signals to Britain that it must first take the plunge of invoking Article 50 to leave the union before being able to negotiate its future trade and other ties with the bloc.

Chancellor Angela Merkel — hosting French President Francois Hollande and Italian prime minister Matteo Renzi in Berlin — said that “we agreed on this, that there will be no informal or formal talks on the exit of Britain until an application has been filed to leave the European Union”.

British finance minister George Osborne had said earlier his country should only activate Article 50 when it has a “clear view” of how its future relations with the bloc would look.

Hours after he spoke, ratings agency Standard & Poor’s removed the UK’s coveted AAA status because of its vote to leave the European Union, downgrading it by two notches with a negative outlook.

“In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK,” a statement from the agency read.

Ms Merkel also vowed that the remaining 27 members would push on with the European project, saying “we will suggest to our [EU] colleagues that we should put in place a new impulse ... in the coming months”.

Speaking on the eve of a two-day Brussels summit, she called for unity and urged a new collective push for cooperation in areas that included “defence, growth or jobs and competitiveness”.

Merkel stressed “there must be no period of uncertainty” that is prolonged, and that the EU must counter “centrifugal forces” in other countries pushing to leave the union.

Mr Hollande, somewhat more bluntly, urged Britain to “not waste time” in triggering the process to leave the EU, arguing that it was to all parties’ benefit to move forward quickly.

“Being responsible means not wasting time — not wasting time in dealing with the question of Britain’s departure, not wasting time too in putting in place the new stimulus that we need to give to the European Union, that is to say, the 27 members.”

“Because nothing is worse than uncertainty,” he added. “Uncertainty generates often irrational behaviour. Uncertainty also leads financial markets to act irrationally.”

Earlier, in his first appearance before the House of Commons since Thursday’s referendum, prime minister David Cameron stressed that the country’s economy can withstand the shock waves created by the vote, and that it is in a far better position than it was at the start of the 2008 financial crisis.

“It is clear that markets are volatile, there are some companies considering their investments and we know this is going to be far from plain sailing.” Mr Cameron said.

“However, we should take confidence from the fact that Britain is ready to confront what the future holds for us from a position of strength.”

Mr Cameron has said he will resign and his successor, to be chosen by the fall, should be the one to navigate the process of negotiating Britain’s EU exit.

The prime minister said he had spoken with Ms Merkel and Mr Hollande, and made plain this was not the time to start the process.

“We have discussed the need to prepare for the negotiations and in particular the fact that the British government will not be triggering Article 50 at this stage,” he said.

In the first direct reflection of the uncertainty hitting business confidence, a leading business group said 20 per cent of its members plan to move some of their operations outside of the UK.

The Institute of Directors said a survey of its 1,000 members showed that three out of four believe that Brexit, will be bad for business. About a quarter said they would freeze hiring and five per cent said they would cut jobs.

The pound hit a new 31-year record low, dropping another 3.5 per cent to US$1.3199. Stock markets also declined across Europe. Bank shares were particularly hard hit, as they are considered a mirror on the larger economy. Shares in Royal Bank of Scotland, once the world’s largest bank and now mostly state-owned, fell some 20 per cent.

Mr Osborne pledged not to impose a new austerity budget — even though he said during the campaign that one would be necessary if voters chose to leave the EU. He said another budget would be the task of Mr Cameron’s successor.

Mr Osborne also said he had been working closely with Bank of England Governor Mark Carney, fellow finance ministers and international organisations over the weekend.

“We are prepared for whatever happens,” he said.

Mr Cameron chaired an emergency Cabinet meeting Monday. US Secretary of State John Kerry is also visiting Brussels and London to address the fallout from the vote.

Political turmoil has roiled Britain since the vote as leaders of the government and opposition parties grapple with the question of how precisely the UK will separate from the other 27 nations in the bloc.

Opposition leader Jeremy Corbyn is facing upheaval within his Labour Party after more than 20 advisers quit his inner circle over that past two days.

Mr Corbyn said he will not resign, and has appointed MPs loyal to him to fill the vacated posts. He insists he will run in any new leadership contest, and said he has the support of the party’s grass roots.

Many Labour politician’s accuse Mr Corbyn of running a lukewarm campaign in support of remaining in the EU. They also fear the left-winger cannot win a general election, which could come well before the scheduled date of 2020, as whoever replaces Mr Cameron may call an early election to solidify a mandate before negotiating Britain’s EU exit.

The vote is also causing a political schism in the UK overall. Scotland’s First Minister Nicola Sturgeon said she would “consider” whether to advise the Scottish Parliament to use its power to try to prevent Britain from leaving the EU. Some 62 per cent of Scots voted to remain in the bloc.

Scottish politicians might be able to derail Britain’s departure by withholding “legislative consent,” she said.

*Associates Press and Agence France-Presse