British EU exit turmoil alarms Asia, deepens party conflicts

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London | Published: June 26, 2016 8:40:50 PM

Turmoil unleashed by Britain's vote to leave the European Union heightened anxiety in Asia on Sunday, with China, Japan and South Korea fretting over the risk to global financial....

brexit, brexit news, brexit india impact, european marketsIn Britain, open conflict spread from the ruling Conservatives to the opposition, and senior Labour lawmakers attempted a coup against their leader after traditional supporters rejected the party’s pro-EU stand in droves at Thursday’s referendum. (AP PHOTO)

Turmoil unleashed by Britain’s vote to leave the European Union heightened anxiety in Asia on Sunday, with China, Japan and South Korea fretting over the risk to global financial stability a few hours before markets reopen.

In Britain, open conflict spread from the ruling Conservatives to the opposition, and senior Labour lawmakers attempted a coup against their leader after traditional supporters rejected the party’s pro-EU stand in droves at Thursday’s referendum.

Splits widened across the nation. Over three million Britons signed a petition calling for a re-run of the referendum, with the number climbing by the hour, and an opinion poll showed a strong majority of Scots now want to break with the United Kingdom.

Scotland’s leader even raised the possibility of blocking legislation that the British parliament must eventually pass to seal the country’s exit from the world’s biggest single market.

The 52-48 percent vote marked the biggest blow since World War Two to the European project of forging greater unity.

Prime Minister David Cameron resigned on Friday after voters ignored his passionate appeals to stay in the EU, but left formally notifying Brussels of Britain’s exit to his successor, who is unlikely to be in office for about three months. That signals a long period of limbo.

Sterling fell as much as 10 percent against the dollar on Friday to levels last seen in 1985, while world stocks saw more than $2 trillion wiped off their value.

The weekend gave some respite from the turmoil, but apprehension grew as Monday’s reopening approached.

Chinese Finance Minister Lou Jiwei said the vote “will cast a shadow over the global economy”.

“It’s difficult to predict now,” he said at the first annual meeting of the Asian Infrastructure Investment Bank in Beijing. “The knee-jerk reaction from the market is probably a bit excessive and needs to calm down and take an objective view.”

Central banks promised through their global forum to do as much as they could to limit volatility on the markets.

“With good cooperation at the global level, I am confident that uncertainty can be contained and that adjustments will proceed as smoothly as possible,” Jaime Caruana, head of the Bank for International Settlements said.

Nevertheless, Japan fretted over the effect on the global currency market and contemplated official action.

“Speculative, violent moves have extremely negative effects,” said Tomomi Inada, policy chief of the ruling LDP party, according to Nikkei daily. “If necessary, the government should not hesitate to respond, including currency intervention.”

Prime Minister Shinzo Abe has tried to engineer a weaker yen to encourage exports to help revive the Japanese economy.

But after initial success, investors have sought safety in the yen this year due to stock market turmoil and now the Brexit vote, pushing the currency back up.

NO RESPITE

South Korea’s finance minister also said he feared markets will remain volatile throughout negotiations on the British exit, while Hong Kong’s finance chief promised his government was keeping a close eye on developments after what he described as “a big surprise” from the referendum result.

Beyond Asia, the United States – which during campaigning made clear it wanted Britain to stay in the EU – also showed signs of unease. Secretary of State John Kerry will meet EU foreign policy chief Frederica Mogherini in Brussels and British Foreign Minister Philip Hammond in London on Monday.

The visit is largely meant to offer symbolic reassurance at a critical juncture for Europe, but a senior U.S. official said Kerry would also stress the importance of other members not following Britain’s lead and further weakening the EU.

Despite the international expressions of concern, respite from the uncertainty is unlikely for months, at the very least.

Cameron has offered to remain as a caretaker, but refused to invoke Article 50 of the EU’s Lisbon Treaty, which allows for two years of exit negotiations.

Instead he left that job to his successor, who is due to be elected by his Conservative Party sometime before its annual conference in October.

Only after the new leader has invoked Article 50 can work on thrashing out Britain’s new relationship with the bloc begin. The man widely tipped as the next prime minister is former London mayor Boris Johnson, the most prominent member of the campaign to leave the EU.

Cameron’s Conservatives have been at war with each other for years over whether to quit the EU. But the vote to leave a bloc that Britain joined 43 years ago also pushed Labour into chaos.

Labour leader Jeremy Corbyn sacked a top colleague on Sunday, setting off a wave of resignations from his “shadow” cabinet. Dismissed foreign affairs spokesman Hilary Benn called for Corbyn, who was elected last year largely by left-wing party members and supporters, to go. “He is a good and decent man but he is not a leader,” Benn told BBC television.

Many of Corbyn’s fellow Labour lawmakers believe his left-wing policies and low-key style mean the party is heading for a disastrous defeat at the next election, due in 2020.

But they also accuse him of half-hearted campaigning for a “remain” vote in the referendum, and of failing to win over traditional Labour voters who were more receptive to the anti-EU UK Independence Party.

NO LYING DOWN

Signs are growing that not all the 16 million Britons who voted to stay in the EU are willing to take the result lying down.

Backing for the online petition demanding a second vote more than doubled in 24 hours, with signatures exceeding 3.2 million on Sunday afternoon.

The petition, posted on parliament’s website before the referendum, said there should be another vote if the outcome was close on a turnout of less than 75 percent – three points above Thursday’s figure.

It will have to be considered for debate by lawmakers, but has no legal force and its backers compare with the 17.4 million who voted “leave”.

The referendum has also re-energised support for Scotland, which voted overwhelmingly to remain in the EU, to break away from the United Kingdom instead.

An opinion poll in The Sunday Post said 59 percent of respondents backed independence, rocketing from 45 percent of votes cast in a referendum in 2014.

Scottish First Minister Nicola Sturgeon has said a fresh independence referendum is possible, and suggested on Sunday that the devolved parliament in Edinburgh would consider blocking legislation making a Brexit legally binding.

Under the United Kingdom’s complex arrangements to devolve some powers to Scotland, Wales and Northern Ireland, legislation generated in London to give effect to the vote to leave the EU would have to gain consent from the three devolved parliaments.

Asked on BBC television whether she would consider asking the Scottish parliament to block a motion of legislative consent, Sturgeon said: “Of course.”

“Don’t get me wrong, I care about the rest of the UK,” she said.

“But my job as First Minister, the Scottish parliament’s job, is to judge these things on the basis of what’s in the interest of people in Scotland.”

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