Brexit worries send pound plunging near 7-year low

The Queen's Royal Guard. [Number 10/Flickr]

The pound plunged Monday (22 February) as Prime Minister David Cameron warned that a vote to leave the EU this year would risk Britain’s economic and national security.

British Prime Minister David Cameron’s deal with the EU last week to avoid a “Brexit” was quickly thrown into question after London Mayor Boris Johnson declared Sunday his support for the exit campaign in the June 23 referendum.

Blow for Cameron as Boris Johnson backs Brexit campaign

London’s mayor Boris Johnson on Sunday (21 February) threw his weight behind the campaign for Britain to leave the European Union, in a blow for his old friend and rival Prime Minister David Cameron who had appealed for his backing.

The pound dived Monday to $1.4058, its lowest level since March 2009, before recovering to $1.4148 at 2200 GMT. It also fell to 77.96 pence per euro.

“London Mayor Boris Johnson openly backed the ‘Out’ campaign to depart from the EU, rattling markets and prompting the pound to slump against most currencies,” said Bernard Yaros of Moody’s Analytics.

Yaros noted that the “Remain” campaign still holds support from key cabinet members and businesses.

Simon Smith, chief economist at FxPro, warned uncertainty ahead of the vote would weigh on the pound.

“For sterling, this won’t be a fun time,” he said.

Cameron faces Parliament

Meanwhile, the Conservative Prime Minister appeared before Parliament to defend the agreement he clinched in Brussels a few days before.

In a speech to the House of Commons, Cameron launched a barely-veiled attack on London Mayor Boris Johnson, his long-term rival who has come out for Britain exiting the EU — a Brexit — accusing him of taking the position for political gain.

Johnson challenged the prime minister to demonstrate how the deal reached in Brussels last week would return sovereignty “over any field of law-making” to the British parliament.

Cameron said the deal would give the UK government greater powers over benefits, migration and an opt-out from an “ever-closer union.”

He told MPs to be clear that a vote to leave would be a “final decision”, not a way to pitch for better membership terms.

“Having a second renegotiation followed by a second referendum is not on the ballot paper,” he said.

As sterling fell to a near seven-year low against the dollar on the currency markets, Cameron told lawmakers that it was time to “properly face up to the economic consequences of a choice to leave”.

Eurosceptics say Britain would still be able to trade with the European Union outside the bloc and regain control over laws and borders, but Cameron said that this would only be “an illusion of sovereignty”.

He also warned repeatedly that the threats of terrorism and Russian aggression in Ukraine meant remaining in the 28-nation club was more important than ever, saying: “This is no time to divide the West.”

Leave camp boosted

Most analysts expect Britain to vote to stay in the EU on June 23, but opinion polls show the public is divided and the declaration of Johnson for the “Leave” camp has boosted its chances.

Cameron set out the details of the reforms secured at an EU summit in Brussels last week, which he argues give Britain “special status” and are enough reason to vote to stay in.

He is facing a major challenge in Johnson, a charismatic figure who manages to reach across the political divide and is tipped as a future prime minister.

Johnson’s announcement Sunday that he would back a Brexit boosted the “Leave” campaign, which until then had been marred by in-fighting and a lack of leadership.

Six ministers who attend cabinet have already declared themselves in favour of the “Leave” campaign and reports suggest around a third of Cameron’s 330 lawmakers could back a Brexit.

‘No other agenda’

The premier emphasised that he has promised not to contest the next election and had “no other agenda than what’s best for our country”, a reference to speculation that Johnson is backing Brexit as a move on the Tory leadership.

And he condemned the idea that a “Leave” vote could simply be a tactic to win further EU reforms, an idea indirectly referenced by Johnson, as “for the birds”.

No country has ever left the EU and the prospect of a Brexit is posing a major headache for the bloc, already grappling with its biggest migration crisis since World War II.

Britain first joined the then European Economic Community (EEC) in 1973, and in a referendum two years later the public backed membership by just over 67 percent.

But the country has had a strained relationship with Brussels, opting out of key projects including the euro and the Schengen passport-free zone.

British Prime Minister David Cameron said he will campaign for Britain to remain in the EU after a two-day summit in Brussels where he obtained concessions from the 27 other EU leaders to give Britain “special status” in the EU.

Britain will vote on its membership of the European Union on 23 June.

The campaign will be bitterly contested in a country with a long tradition of euroscepticism and a hostile right-wing press, with opinion polls showing Britons are almost evenly divided.

Cameron’s Conservative Party has long been split over Europe and the premier held an emergency cabinet meeting on Saturday to try to persuade ministers to his cause.

But no sooner had the talks ended than five of the cabinet’s 22 ministers announced they would be campaigning to leave, including justice minister Michael Gove.

The position of the popular Conservative Mayor of Londonm Boris Johnson, appeared as potentially decisive in the referendum campaign, which has now officially started.

Cameron clinches reform deal after benefits compromise

UK Prime Minister David Cameron on Friday night (19 February) said he would campaign for Britain to stay in a reformed EU, after securing promises of treaty change and compromising on his demands over benefits for EU migrants and their children.

  • 23 June: Britain holds referendum on its continued membership of the European Union.

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