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Central bankers vow to intervene in volatile markets amid Brexit discord

UK political leadership faces deep split even as opposition's shadow Cabinet rebels; EU leaders seek urgent start to talks with Britain
Monday, June 27, 2016 - 05:50
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Mr Cameron said that he would continue as premier until October, though his European counterparts want a new premier much earlier

London

CENTRAL banks have agreed to back the Bank of England (BOE) and intervene in volatile markets to counter uncertainty from a divided post-"Brexit" Britain and acutely anxious Europe.

Such moves are vital as the British nation's political leadership is deeply divided following Prime Minister David Cameron's resignation, and a shadow Cabinet rebellion against opposition leader Jeremy Corbyn. Meanwhile European Union (EU) leaders are frantically appealing for an urgent beginning of negotiations with Britain via the implementation of Article 50 of the Lisbon Treaty.

 "Governors endorsed the contingency measures put in place by the Bank of England and emphasised the preparedness of central banks to support the proper functioning of financial markets," said chairman Augusten Carstens at the annual meeting of the Bank of International Settlements. At the meeting, global central bankers who convened to discuss global economic and financial developments stressed that they would cooperate closely. The BOE is prepared to pump £250 billion (S$462 billion) into the markets, its governor Mark Carney has announced. The expectation is that interest rates could slide to zero.

Within Britain, the populace of London, Scotland and Northern Ireland are deeply discontent with the close referendum result as the vast majorities voted to remain in the union. Indeed a petition for another referendum has already reached three million, although politicians say that it will not take place. Michael Gove, Justice Secretary, has backed Boris Johnson as the new premier but there is considerable opposition from the Remain camp as they are blaming him for the Brexit victory. Senior Tories have broken cover to mount "Stop Boris" leadership bids. Signalling their intentions to run are Education Secretary Nicky Morgan, Pensions Secretary Stephen Crabb and Liam Fox, a former Defence Secretary.

Mr Cameron, who said that he would continue until October even though his European counterparts want a new premier much earlier, will be attending a EU meeting early next week. Negotiations, however, will not be in his hands.

Some Brexit campaigners have maintained that Britain should aim to negotiate a comprehensive new relationship with the EU, seeking access to markets without submitting to EU rules or open migration, before binding itself into the two-year timetable of Article 50.

Such views worry EU officials and leaders who fear that lengthy arguments and negotiations will further increase the risk of a domino effect of nationalist-led demands for exit from other states. Marine Le Pen, head of the French National Front, for example, has already demanded that France should have a referendum. 

So far George Osborne, Chancellor of the Exchequer, who had been forecasting economic doom and had threatened a budget with high taxes and spending cuts, has neither made a statement nor been seen in public.

There are whispers within the Tory party that he'll have to resign. In the meantime, Business Secretary Sajid Javid has called an emergency business summit this week to boost confidence of corporate leaders.

Mr Javid, who campaigned to remain in the EU, has called on foreign investors and UK CEOs to get advice and try to ease fears that they could lose trade and Britain's economy will slide into recession. Writing in The Sunday Times today, Mr Javid said: "A clear majority wanted us to leave. My job now is to put their wishes into action in a way that ensures the UK remains open for business, continues to grow, and continues to thrive. Together, we can make this work."

The Business Secretary will hold a roundtable meeting this week with two dozen business leaders, including the heads of the British Chambers of Commerce, CBI and the Federation of Small Businesses. Besides trade, other issues are future employment of Continental and other foreign workers in Britain and how to do business until the final exit from the Union.

Nicola Sturgeon, First Minister of Scotland, complained that there was a vacuum of leadership in the UK and said that she would have discussions with the EU on various options for the Scottish people who wish to be part of the EU.

"Those people who voted for the UK in the Scottish referendum in 2014 voted for stability. This is not evident now," she complained, adding that a new referendum could take place depending on the timing.

For more coverage of the EU referendum, visit bt.sg/BrexiT

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