British EU vote causes alarm abroad as ripples spread

By Estelle Shirbon and Ben Blanchard

LONDON/BEIJING (Reuters) - Britain plunged deeper into political crisis on Sunday after its vote to leave the European Union last Thursday, leaving EU and world officials confused about what to do next.

British Finance Minister George Osborne, who had warned during the campaign that a "Brexit" would cause financial market volatility, scheduled a statement for 7 a.m. (0600 GMT) on Monday to provide reassurance about "financial and economic stability".

But, Boris Johnson, the leading "Leave" campaigner and favourite to become the next prime minister, sought to calm fears about Britain's economic future, saying it would continue to have access to the EU single market.

China's finance minister said fallout from Thursday's referendum "will cast a shadow over the global economy", while a senior official in Tokyo warned of the danger of "speculative, violent moves" in currencies.

Open political conflict spread from the Conservatives to the opposition Labour party, where senior lawmakers withdrew backing for their leader after traditional supporters rejected the party's pro-EU stand in droves.

Splits widened across the UK. Over 3.5 million Britons signed a petition demanding a re-run of the referendum, with the number climbing by the hour, and an opinion poll indicated that a large majority of Scots now want to break with the United Kingdom.

Scotland's leader promised she would do whatever it takes to keep her strongly pro-EU country in the bloc, including potentially vetoing legislation on a British exit.

But French President Francois Hollande declared there was no going back on "Brexit", saying: "What was once unthinkable has become irreversible."

Hollande said France and Germany must use their strong friendship to seize the initiative, warning that "separated, we run the risk of divisions, dissension and quarrels".

He and Chancellor Angela Merkel discussed the issue by phone and an aide said they were in "full agreement on how to handle the situation".

Merkel had been more emollient on Saturday, calling for clear-headed negotiations with a "close partner", but German Vice Chancellor Sigmar Gabriel took a tough line on Sunday.

"We will not hold talks about what the EU can still offer the Britons to keep them in," Gabriel said.

KNEE-JERK REACTION

British Prime Minister David Cameron resigned on Friday after voters ignored his appeals to stay in the EU by 52 to 48 percent, delivering the biggest blow since the war to the European project of forging greater unity.

Cameron left the task of formally notifying the EU of Britain's intention to leave to his successor, who is unlikely to be in office for about three months, suggesting a long period of uncertainty lies ahead. He will meet the other 27 EU leaders at a summit in Brussels on Tuesday.

Johnson, the former London mayor, said in his regular column for Monday's Daily Telegraph newspaper that there was "no great rush" for Britain to extricate itself from the EU, while seeking to allay fears of the economic consequences.

"There will continue to be free trade, and access to the single market," he wrote, though he did not explain how he planned to secure this access without sacrificing some of the main promises that "Leave" campaigners made to voters, notably that Britain would be able to cut immigration and free itself from regulations set in Brussels.

He also said he did not believe those who voted to leave had been mainly driven by anxieties about immigration.

Sterling fell as much as 10 percent against the U.S. dollar on Friday to levels last seen in 1985, while more than $2 trillion was wiped off the value of world stocks, the biggest daily loss in history, according to Standard & Poor's Dow Jones Indices.

As world markets opened in Asia early Monday, U.S. stock futures slipped further and the British pound fell more than 1.0 percent against other currencies, suggesting investors may suffer more losses in the days ahead. [MKTS/GLOB]

Among the many questions Brexit has triggered are just how much UK and European economies will slow down, how they will negotiate their new trade relationship and how European leaders will try to hold the European Union together.

A UK Treasury spokesman said Finance Minister Osborne's statement would set out "the actions that he and the rest of the government will be taking to protect the national interest over the coming period".

In China, Finance Minister Lou Jiwei expressed his concerns about the threat to the global economy.

Central banks promised through their global forum to do as much as they could to contain market uncertainty.

Already, the Bank of England and some other of the world's biggest central banks have offered financial backstops in the hope of calming investors.

Japan contemplated official action on the currency market. "Speculative, violent moves have extremely negative effects," said Tomomi Inada, policy chief of the ruling LDP party, according to the Nikkei daily. "If necessary, the government should not hesitate to respond, including currency intervention."

NO RESPITE

The United States, which had made clear it wanted Britain to stay in the EU, also showed signs of unease. U.S. Secretary of State John Kerry will visit Brussels and London on Monday. A senior official said Kerry would stress the importance of other EU members not following Britain to further weaken the bloc.

Despite the international expressions of concern, relief from the uncertainty is unlikely for months.

Cameron has offered to remain as a caretaker prime minister of Britain, but refused to invoke Article 50 of the EU's Lisbon Treaty, which allows for two years of exit negotiations. His successor is due to be elected by his Conservative Party sometime before its annual conference in October.

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 the UK Labour party into chaos.

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

Corbyn, whose critics accuse him of running a half-hearted campaign for a "Remain" vote, and of failing to win over traditional Labour voters who were more receptive to the anti-EU message of the UK Independence Party, refused to resign.

NO LYING DOWN

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

An opinion poll in the Sunday Post found that 59 percent of Scots backed independence, rocketing from the 45 percent who voted for it in a referendum in 2014.

Scottish First Minister Nicola Sturgeon has said a fresh independence referendum is possible, although Johnson said he did not detect "any real appetite" for one.

Under the UK's complex arrangements to devolve some powers to Scotland, Wales and Northern Ireland, any legislation before the Westminster parliament to withdraw Britain from the EU may also have to gain consent from the three devolved parliaments.

Asked whether she would consider asking the Scottish parliament to block a motion of legislative consent, Sturgeon said: "Of course."

However, a spokesman for Sturgeon later said that there was legal debate over whether a lack of Scottish consent would be enough to hold up the withdrawal, and that the Scottish government expected their London counterparts to say it was not needed.

Beyond Scotland, 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 an online petition demanding a second vote more than doubled in 24 hours.

It will have to be considered for debate by lawmakers, but has no legal force and its 3.5 million backers compare with the 17.4 million who voted "Leave".

(Additional reporting by Elizabeth Piper, Kylie MacLellan, William James, Ingrid Melander, Christine Kim, Donny Kwok, William Schomberg, Minami Funakoshi, Francois Murphy and Warren Strobel; Writing by David Stamp, Anna Willard and Kevin Liffey)