The United Kingdom has voted to leave the European Union (EU) following a 52-48 referendum, forcing Prime Minister David Cameron to resign and leaving stock markets unstable worldwide. Both European and Asian stock markets crashed on opening Friday morning as investors dumped shares, according to the Associated Press. Oil prices crashed, and the pound is at its lowest level since 1985 against the U.S. dollar. It was the pound’s greatest single-day drop in history.
Britain’s FTSE 100 dropped eight percent. The German index dropped ten percent. Followed by France, which fell seven percent. Tokyo stock markets were also slammed, with the Nikkei 225 dropping eight percent, its biggest loss since 2008. Asian stock markets expect to finish the day at their lowest in years. However, the yen surged up to four percent against the U.S. dollar as investors reclaimed Japanese currency.
Ken Courtis, the chairman of Starfort Investment Holdings in Tokyo said, “You can see people are running for cover. What you’re seeing now in markets is an adjustment in the other direction, as everyone tries to get through a tiny door at the same time.”
The European Union was established after World War II to combine the interests of all the European nations to avoid a potential World War III. Twenty eight countries belong to the European Union. Now that the UK has voted to leave the EU, it will lead to years of negotiations in the areas of trade, business and politics.
“The currency markets are particularly making nervous fluctuations and we will watch their activity very closely so that the ongoing movement will not continue, and I hope to see firm intervention whenever necessary,” Taro Aso, Japan’s finance minister said.
Billions of dollars were wiped off European banks’ market value, with Britain’s Royal Bank of Scotland, Barclays and Lloyds Banking Group among the biggest losers, according to Reuters.
U.S. stock markets are also expected to have big losses today. Yesterday U.S. crude fell five percent to $47.65 a barrel in New York. Brent Crude, the benchmark for international oil price, also fell five percent to $48.54 per barrel in London.
“Financial markets throughout the night have been chaotic to say the least,” said Craig Erlam, senior market analyst at Oanda in London. “All eyes will now be on central banks around the world to see how they respond to these market developments, particularly the Bank of England and the Bank of Japan.”
Prime Minister David Cameron made an emotional announcement that he would resign by October. “The British people have made the very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction. I do not think it would be right for me to be the captain that steers our country to its next destination.”
Boris Johnson, Cameron’s conservative party rival and the former mayor of London, has been a proponent for the United Kingdom’s separation from the EU, and it is rumored he will replace Cameron.
Leaving the European Union could cause economic and political damage to the United Kingdom as it tries to reestablish its independence in a country where two-thirds of the voters wanted to remain in the EU according to some surveys. Analysts said the UK itself could even break up.
Those in favor of UK leaving the EU are praising the move as a victory over big business, political establishment, and foreign leaders, including U.S. President Obama, who encouraged the UK to stay with the European Union.
“Dare to dream that the dawn is breaking on an independent United Kingdom,” said Nigel Farage, leader of the eurosceptic UK Independence Party. “This will be a victory for real people, a victory for ordinary people, a victory for decent people… Let June 23 go down in our history as our independence day.”
Former Finnish Prime Minister Alexander Stubb tweeted, “Please tell me I’m still sleeping and this is all just a bad nightmare!”
French National Front leader Marine Le Pen said, “Victory for freedom!”
Dutch far right leader Geert Wilders said: “We want to be in charge of our own country, our own money, our own borders, and our own immigration policy.”
[Photo by Lee Jin-man/AP Images]