Return to Transcripts main page

Early Start with John Berman and Zoraida Sambolin

UK Dealing with Fallout from Brexit; Scotland Seeks to Remain in EU; European Markets Lower at the Open. Aired 4:30-5a ET

Aired June 27, 2016 - 04:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[04:31:57] MAX FOSTER, CNN ANCHOR: You're watching CNN's special coverage of the international fallout from the UK's decision to leave the European Union. I'm Max Foster live for you outside the Houses of Parliament for the very latest developments on this story.

European markets falling yet again with the FTSE in London losing the most. Investors are anxious after last week's Brexit vote despite an attempt by Britain's Finance minister to reassure the markets. They're not down too bad but on an ordinary day that would be bad.

In a televised address, George Osborne said the UK and its finances were equipped to deal with the likely turbulence ahead.

Britain's opposition leader, meanwhile, Jeremy Corbyn, is battling a crisis in his Labour Party. Some people saying the Labour Party's very essence is at risk today. He has just appointed a series of new members to a shadow cabinet after nearly a dozen of his team resigned. Critics within the party have said Corbyn failed to provide leadership in the campaign to remain in the EU.

And Scotland's first minister says her country will do whatever it takes to stay in the EU. Nicola Sturgeon says she wants to make sure that Scotland's democratic will is respected after a majority of Scots voted remain in Thursday's referendum. Sturgeon also says her priority is to protect the people of Scotland through what will inevitably be a difficult time.

(BEGIN VIDEO CLIP)

NICOLA STURGEON, SCOTTISH FIRST MINISTER: My challenge but also my responsibility as first minister is to seek to negotiate, to protect Scotland's interest. What's going to happen with the UK is that they are going to be deeply damaging and painful consequences of the process of trying to extricate the UK from the EU. I want to try and protect Scotland from that.

(END VIDEO CLIP)

FOSTER: David Torrance is a political commentator and author, joins us from Edinburgh, Scotland. Would you mind interpreting what she was saying there for the wider audience?

DAVID TORRANCE, POLITICAL COMMENTATOR: Well, basically, she's presenting a bit of a contrast between her sort of cool authority and leadership terms and the stability of the situation in Scotland with what could reasonably be depicted as chaos and a bit of a political vacuum in Westminster. And in essence her plan is to try and find a way of keeping Scotland, which of course is part of the UK and is still part of the UK in the EU or at least in the single market while the rest of the UK starts to negotiate its extraction from the European Union.

FOSTER: She has a nuclear option, doesn't she? She outlined that or suggested it yesterday. She's suggesting that the law dictates that the Scottish parliament could block a Brexit. Lawyers are sort of discussing that as we speak. Much more qualified people than us. But Douglas Carswell of UKIP just telling me in the last hour there's no way that Scotland has any say in this. It will all be decided in parliament here. What's your understanding?

TORRANCE: My understanding is that's simply not a runner. And indeed constitutional experts I spoke to yesterday confirmed that. They're slightly mystified by what the first minister said.

[04:35:02] I mean, she's mentioned pursuing a range of options in terms of Scotland moving forward but that didn't strike anyone I spoke to as a credible one. For the simple reason that matters constitutional and that includes the UK's membership of the European Union are explicitly reserved to Westminster. There's a clear division of powers between the divulge Scottish parliament and the UK parliament, the UK government in London. And that simply isn't a responsibility of the parliament in Edinburgh has.

FOSTER: So what is the next step for Nicola Sturgeon? Many people say is that she is the one leader that's really emerged as the strongest in this whole debate. She's also getting what she wants or she's moving towards it. What is her next move whilst this place goes into meltdown?

TORRANCE: She has spotted a very clear political opportunity to revive the argument for independence which, of course, was put to a referendum less than two years ago and was lost. So her plan -- she'll be addressing parliament tomorrow. But this week and next she'll be trying to engage directly with the European Union leaders presumably in Brussels. She's also convening a summit of all the 27 member states consul generals based in Edinburgh.

Host to engage directly with them. I assume a bit of a charm offensive to make the case for some sort of compromise, some sort of flexibility toward Scotland. But, of course, it won't be easy. There is no direct precedent for this. People have spoken of Scotland doing a reverse Greenland. Greenland is an autonomous part of Denmark. It opted out of the European Union in the '80s. But it's not clear cut.

And of course there is the prospect as there was two years ago of a Spanish veto. The Spanish government embroiled in their own constitutional debate with Catalonia. Doesn't want to establish a precedent.

FOSTER: OK. Thank you very much indeed for that. That's the view from Scotland. Robin Oakley is here. And that's really pertinent, isn't it? We had

this with the Scottish referendum that there are particular governments in Europe who block Scottish membership in their own right of the European Union. This is no way they want a Catalonia or another sort of upsurge of nationalism in a region.

ROBIN OAKLEY, CNN POLITICAL CONTRIBUTOR: Every one of the 27 countries has the right of veto over the admission of a new country. And as you say, Spain and perhaps one or two other countries not keen to encourage regional divergence in their own country.

FOSTER: How does she capitalize on this undoubted wave in her favor then?

OAKLEY: Well, she capitalizes in the -- to the extent of probably being able to win a referendum on independence for Scotland. Last time around, it was, what, 55-45. But, you know, the figures, I think, will have moved considerably in the favor of those who want to see --

(CROSSTALK)

FOSTER: And a very different atmosphere because Scots at the time when I was up there, the people that voted to stay in the UK, they were going for security. They were looking for that security. And the other side hadn't really convinced them that the risk was worth taking. But there's so much risk around at the moment. Actually leaving to some people there now feels like the safe option.

OAKLEY: There's a degree of confidence in Scotland that we perhaps didn't see at the time of the last referendum. But at the same time there's the question of the oil revenues which would be a big factor in all of this. And world oil prices having dipped. You know, it's not such a good economic background for Scotland to go independent, but people might not see that as the major factor any longer.

FOSTER: Let's look at the immediate crisis for the opposition Labour Party. Jeremy Corbyn staying in his job. He's lost most of his cabinet, though. He's filled the positions with people of his own political persuasion largely on the left. How is he going to get through this?

OAKLEY: It's an absolutely bizarre spectacle. I can't recall a time when so many senior figures in one party have demonstrated their lack of faith in their own leader. And, of course, part of it is the feeling that he didn't do enough for the Remain campaign, to which the Labour Party was committed. Jeremy Corbyn is a longtime Euro skeptic, and it showed during the campaign. He really didn't put much effort into it or conviction.

But a lot of Labour MPs were also saying, look, is this guy really up to the job? He comes from a narrow section of the Labour Party. He's very sincere in his views and everybody respects him for that. But as a party leader, you have to be able to go out and persuade people who are not of your particular set of views to back your party. He just doesn't show any of those characteristics of being a leader who can engage with the country at large and bring back some of those Labour voters who disappeared. Particularly the ones who disappeared to UKIP because it was in the Labour strongholds in the north and in the midlands that the Leave vote racked up their biggest results in the referendum.

FOSTER: OK. Robin, thank you very much indeed.

Many more strands to look at. You're watching CNN's special coverage of the UK's decision to leave the EU.

[04:40:03] Still to come, more analysis of what this means for the global financial markets. They're all watching.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Outrageous. I think it's terrible. I think worst day in British history for about 50 years. Horrendous. Absolutely horrendous. I think Cameron should be taking personal responsibility for resolving a referendum that he himself called basically.

(END VIDEO CLIP)

FOSTER: Just one of so many opinions being expressed across the UK right now.

Hello, and welcome back to CNN's rolling coverage of the UK's Brexit vote and how the decision to leave the European Union is affecting the rest of the world.

I'm Max Foster in London.

Now the UK parliament here is convening today for the first time since the referendum results. One big issue coming up, the vacancy that David Cameron has left or will leave when he steps down as prime minister and Conservative Party leader later this year.

[04:45:07] In the past couple of hours, UK Finance Minister George Osborne gave a televised address in which he tried to calm any fears about the British economy but markets are down this morning as the impact of Brexit sinks in.

The UK is divided politically, geographically, generationally, socially following the Brexit vote. So how can it recover?

Richard Quest is here with me. And what George Osborne was doing was tried to create some sort of continuity and stability to the system.

RICHARD QUEST, CNN MONEY EDITOR-AT-LARGE: Yes, because clearly it is uncertainty. It is the weight of uncertainty that is now causing most of the difficulties. There is a worry about how they move forward. Business could put spending on hold. Consumers may stop buying big products. Nobody wants to take a risk until they know what the economic picture actually is going to look like. And what George Osborne did say is that he stood back for none of --

he did not stand back from any of the comments that he actually made during the campaign. So, yes, he does believe there will be a recession and he does believe that there will be a major re-adjustment in the British economy.

FOSTER: He also said they planned for that so you shouldn't worry too much. We've got a plan in place. But did they?

QUEST: Of course they planned.

FOSTER: Well, they planned an emergency budget.

QUEST: Well, forget -- that was one aspect. But they planned about how to put the fire out. They planned how to deal with the fact that the house is burning. Yes, they certainly did. The Bank of England did. Everybody had a plan in place for liquidity to make sure that the markets don't completely fall over. Yes, they did have a plan for that.

FOSTER: Looking ahead, how does Britain -- British business readjust its mindset to deal with this because Brussels has always been there, hasn't it?

QUEST: Yes, and that's the only government that has to rethink things but business has to rethink things. Every business. I'll give you an example. Easyjet and, say, for example, British Airways owner of IAG, they have to now, particularly Easyjet, where all those European bases in France, in Germany, in Spain, in Portugal, all those bases that they have on mainland Europe are running under the certificate of the British Easyjet.

Now that certificate will no longer be valid for all those other ones after Brexit takes effect. So every company is at the moment analyzing, including our own, analyzing what is the effect once Brexit finally takes place in, say, two or three years time. Well, what is my Brexit downfall if you like, as a result of that.

FOSTER: OK. Richard, thank you very much indeed.

A lot to digest. We'll be doing it for you. Markets find some stability then following Friday's dramatic losses. When we return a closer look at what we can expect from investors in the hours ahead today because they're pretty unsettled.

(COMMERCIAL BREAK)

[04:52:11] FOSTER: Global markets beginning to stabilize thankfully following Friday's turbulent reaction to the Brexit vote in the UK. Wall Street futures are lower but it's nothing like the 600-point loss that we saw in the Dow on Friday.

Here in London, the FTSE 100 continues to lose ground despite the Finance minister's words of reassurance before the start of trade. Markets in Paris down 1 percent. Let's go to Nina. She's on the trading floor -- Nina. OK. No Nina.

But as you can see, the markets are down pretty substantially. But not as bad as it could have been, according to some.

For more on what we can expect in the hours ahead, we're going to speak to Francesco Guerrera, associate editor-in-chief, financial correspondent for Politico.

A very busy weekend for everyone to try to digest to make sense of this. For your international audience, how are you headlining this?

FRANCESCO GUERRERA, CHIEF FINANCIAL CORRESPONDENT, POLITICO: Well, we're trying to explain what is essentially three days of confusion. Nobody knows how the UK is going to leave, when the UK is going to leave. There's a lot of machination in Brussels and in national capitals to try and give the UK more time.

FOSTER: Yes.

GUERRERA: To try and give more time to --

(CROSSTALK)

FOSTER: Find a leader.

GUERRERA: Heal and -- well, find a leader and work out a deal.

FOSTER: Yes.

GUERRERA: That enables the UK to actually do it properly.

FOSTER: But if George Osborne was negotiating a deal over the next three months and a new prime minister comes in, how do the Europeans know that they're dealing with the right deal?

GUERRERA: So I don't -- I think the Europeans will do their best to wait for the next prime minister.

FOSTER: Yes.

GUERRERA: I don't think they're going to rush into triggering the clock ticking for the UK to leave because then you only have two years and you can't negotiate with someone who is essentially a lame duck as Osborne would be. So they have to wait. The question will be whether there's a hawkish part of the European Union that wants to go faster.

FOSTER: Yes. And what are they saying to each other? Because they've got to come up with a common message, haven't they, which is difficult at the best of times in Europe, absolutely vital right now if they're going to meet David Cameron tomorrow?

GUERRERA: So what we're seeing now is an attempt by the core, what they will say, the core founders of the EU. So France, Germany, Italy, to try and come up with a solution that they can then sell to the rest of the European Union. First thing is happening today. Tomorrow we'll have another meeting. Angela Merkel is very much in the driving seat. The Italians are helping out.

FOSTER: Yes.

GUERRERA: The French are helping out. The issue is there's now 27 members of the EU.

FOSTER: Yes.

GUERRERA: It's possible that they won't be able to sell it to all the rest of EU.

FOSTER: Well, France is absolutely furious. Many parts of the French political establishment they want to punish the UK. They don't want to -- let it become an example. Angela Merkel being more conciliatory. You expertise is Italy as well. So what are they going into this from?

GUERRERA: So when I talk to the Italians, they are very much in the camp of giving the UK more time. It is sure that they want to give a precedent. Italy has a very important referendum in October which could also trigger some European problems. So they want to make insure that this is done properly. And they want to give the UK more time.

[04:55:01] So the tension now is between those who want to make sure that the UK has about three months to find a new leader and a new prime minister and those who say, you know, they want out, let them out.

FOSTER: But is the argument being that the referendum was actually the trigger for this Article 50 process?

GUERRERA: That's the argument but -- and the argument is interesting. We heard it before the referendum. And now you're hearing less and less in Brussels.

FOSTER: Trying to make sense of it. Thank you very much indeed.

I'm Max Foster in London. Thanks for joining us. We are -- for our viewers in the U.S., "EARLY START" is going to come up for you next. But for everyone else, Nina Dos Santos will continue our coverage of the UK's decision to leave the EU.

(COMMERCIAL BREAK)