European leaders told Britain on Tuesday to act quickly to resolve the political and economic chaos unleashed by its vote to leave the European Union, a move the IMF said could put pressure on global growth.
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Financial markets recovered slightly after the result of Thursday's referendum wiped a record $3 trillion off global shares and sterling fell to its lowest level in 31 years, but trading was volatile and policymakers said they would take all necessary measures to protect their economies.
British Finance Minister George Osborne, whose attempt to calm markets had fallen on deaf ears on Monday, said the country would have to cut spending and raise taxes to stabilize the economy after a third credit ratings agency downgraded its debt.
Firms have announced hiring freezes and possible job cuts, despite voters' hopes the economy would thrive outside the EU.
European countries are concerned about the impact of the uncertainty created by Britain's vote to leave on the 27 other EU member states. There is little idea of when, or even if, the country will formally declare it is quitting.
"The process for the United Kingdom to leave the European Union must start as soon as possible," French President Francois Hollande said. "I can't imagine any British government would not respect the choice of its own people."
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European Commission President Jean-Claude Juncker sent a similar message as he prepared for talks with British Prime Minister David Cameron before an EU summit in Brussels, although he did not anticipate an immediate move.
"We cannot be embroiled in lasting uncertainty," Juncker said in a speech to the European Parliament, which he interrupted to ask British members of the assembly who campaigned to leave the EU why they were there.
Cameron, who called the referendum and tendered his resignation when it became clear he had failed to persuade Britain to stay in the EU, says he will leave it to his successor to formally declare the country's exit.
Arriving for the EU summit, he said: "I'll be explaining that Britain will be leaving the European Union but I want that process to be as constructive as possible, and I hope the outcome can be as constructive as possible.
Holding out hope of maintaining good relations with other European countries, he said Britain wanted "the closest possible relationship in terms of trade and cooperation and security. Because that is good for us and that is good for them."
His party says it aims to choose a new leader by early September. But those who campaigned for Britain's leave vote have made clear they hope to negotiate a new deal for the country with the EU before triggering the formal exit process. European leaders have said that is not an option.
"No notification, no negotiation," Juncker said.
After Cameron has addressed EU leaders on Tuesday evening, they will meet the next day to discuss Brexit without him.
Leave campaigners in Britain including Boris Johnson, a likely contender to replace Cameron, suggest the country can retain access to the European single market and curb immigration -- but those goals are mutually incompatible under EU rules.
German Chancellor Angela Merkel said Britain would not be able to "cherry-pick" parts of theEU, such as access to the single market, without accepting principles such as freedom of movement when it negotiates its exit from the bloc.
"I can only advise our British friends not to fool themselves ... in terms of the necessary decisions that need to be made in Britain," she told German parliament in Berlin.
Cameron will meet other European counterparts one-on-one before addressing them all at what promises to be a frosty dinner to discuss what has become known as Brexit.
EU lawmakers say they want him to trigger the exit process at the dinner, but an EU official said that was unrealistic given the political chaos in London, where both Cameron's party and opposition Labour lawmakers are deeply divided.
The ruling Conservative Party is split into pro- and anti-EU camps and Labour Party leader Jeremy Corbyn was facing a no confidence vote on Tuesday from parliamentarians who accuse him of lukewarm support for the EU.
The European Parliament jeered when Nigel Farage, the leader of Britain's euroskeptic UKIP party, said in a scathing speech that Europe had deceived its population and Britain would be its "best friend" if it agreed to extend a tariff-free trade deal.
But the vote has caused new friction in the EU at a time of crises over a mass influx of refugees, economic weakness and tensions on its borders with Russia.
Poland's foreign minister demanded Juncker and other leaders of the executive European Commission quit for not preserving the Union. The prime minister of Greece, enduring austerity measures in return for aid, said Europe must change direction.
Germany's financial market regulator delivered a double blow to London, saying it could not host the headquarters of a planned European stock exchange giant after Britain leaves theEU, and could not remain a center for trading in euros.
Fitch joined other credit ratings agencies in downgrading its sovereign debt on Monday, and Osborne said Britain faces tax rises and spending cuts.
"We are going to have to show the country and the world that the government can live within its means," Osborne, who campaigned to stay in the EU, told BBC radio.
MAYOR SEEKS MORE AUTONOMY FOR LONDON
The 52-48 percent vote to leave has deepened multiple geographical as well as political and social divisions in the United Kingdom.
Sadiq Khan, the mayor of London, where a majority voted to stay and people fear job losses if the city loses its status as a global financial center, said access to Europe's market was key. "On behalf of all Londoners, I am demanding more autonomy for the capital - right now," he said.
Scotland, where people voted strongly to remain in Europe, is weighing a possible second referendum on leaving the United Kingdom given the vote to leave the EU.
Scottish leader Nicola Sturgeon denounced what she called a vacuum of leadership in London and said three months of political drift until a successor to Cameron is in place would further damage Britain's economy. She said she would meet EU leaders on Wednesday to discuss how Scotland could remain.
The impact looked likely to spread far beyond Britain's borders although European shares rose after a heavy sell-off, partly due to hopes of a more co-ordinated central bank response to financial market losses. Sterling also rose and Wall Street opened higher as investors hunted for bargains.
European Central Bank President Mario Draghi said central banks around the world should aim to align monetary policies to mitigate "destabilizing spillovers" between economies.
Shares in European banks have come under particular pressure, especially those based in Britain, over doubts about future market access, and Italy, with high levels of bad loans.
Brexit creates huge political uncertainty and will put pressure on global growth, the International Monetary Fund (IMF)'s Deputy Managing Director Zhu Min said on Tuesday at the World Economic Forum in Tianjin in northern China.
Asian stocks rose and Chinese stocks, protected by capital controls, hit a three-week closing high. Chinese Premier Li Keqiang sought to reassure investors by saying the country would not allow "roller-coaster" rides in capital markets.
Dutch Prime Minister Mark Rutte said England had collapsed "politically, monetarily, constitutionally and economically".
U.S. President Barack Obama told National Public Radio there had been some hysteria "as if somehow NATO's gone, the trans-Atlantic alliance is dissolving, and every country is rushing off to its own corner. That's not what's happening."
In view of the disarray in Britain, some people questioned whether Brexit would happen at all. Nordea bank analysts gave it a likelihood of 70 percent and a senior EU official involved in the process said he thought the country may find a way never to announce its formal departure to the bloc.
(By Michael Holden and Elizabeth Piper; Additional reporting by Alastair Macdonald, Paul Taylor, Gabriela Baczynska, Phil Blenkinsop and Jan-Robert Bartunek in BRUSSELS, Sudip Kar-Gupta and Guy Faulconbridge in LONDON and Alistair Scrutton in STOCKHOLM, writing by Philippa Fletcher, editing by Anna Willard and Timothy Heritage)