In the wake of last week’s surprise vote for Britain to leave the European Union (EU), markets, analysts, and politicians are springing to respond.
The British pound lost over 7% of its value almost instantly against the U.S. dollar, bringing the currency to its lowest point since 1985. The decline has significantly hurt British purchasing power for imported goods and services, but has also made British companies more competitive internationally; the economic impact of the change in currency remains uncertain.
Most economists warn that the country’s ability to export to the European Union is significantly impacted by Brexit, although its ability to export to other nations has improved due to the weaker pound. Tourism is also expected to rise in the near term as a result.
Stock markets throughout Europe also suffered major losses on Friday after the result was announced, but Britain fared significantly better than many of its continental peers. While the FTSE 100 index fell over 3%, France’s CAC 40 lost over 8% and Germany’s DAX fell nearly 7%. Greece’s Athex Composite lost over 13%, while Spain’s IBEX 35 fell over 12%—the largest one-day decline in that country’s history.
The larger weakness on the continent points to market concerns that Brexit will not only negatively impact Britain, but could be a prelude to long-term instability in Europe as a whole. Already some politicians in the Netherlands are calling for a referendum of their own to leave the EU.
The political response across Europe has been immediate and varied. British Prime Minister David Cameron, who promised a referendum when elected and has since fiercely opposed a vote to leave, has announced his resignation no later than October. Saying that a new Prime Minister will have to decide how and when to follow through on British voters’ wishes to leave the EU, he said he would continue to prepare the country for Brexit in his remaining weeks in office.
On the continent, French and German politicians have given varied responses to the Brexit. German Chancellor Angela Merkel, who has been in power for over 10 years, said she wants leaving talks to begin soon, adding that there is “no need to be nasty” as Europe abides by Britain’s wishes. Merkel also added, however, that the EU would not offer the UK special consideration in trade negotiations, which they currently enjoy as a full EU member.
Outside of Europe, responses to the Brexit have been more muted. The White House issued a statement saying that they respected Britain’s decision, and that the special relationship between the UK and America “is enduring."
Obama previously urged the UK to remain in the EU, and warned that Britain would lose favor in trade deals if the country left the EU. Recently, White House spokesman Eric Schultz affirmed that the president stands by that warning.