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Quest Means Business

Brexit Vote Shocks Global Markets; Worst Fall for Dow in Five Years; Sterling's Fall Worse Than 1992 Black Wednesday; Central Banks Ready to Calm Markets if Needed; Central Banks Ready to calm Markets if Needed; Dow Tumbles After Britain Votes to Leave EU; Banks Hit Hard By Post Referendum Volatility; Brexit Reaction: Financial Stocks Hammered; Eurozone Stocks Take Brunt of Brexit Fall Out; Cameron to Resign After Losing Brexit Vote; Rio Drug-Testing Lab Suspended; Lagarde: Future of U.K.-EU Relations Unknown; Vote Shows a Divided United Kingdom. Aired 4-5p ET

Aired June 24, 2016 - 16:00   ET

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

[16:00:00] RICHARD QUEST, CNN ANCHOR: Breaking New, closing bell is ringing on Wall Street. The Dow Jones is just about to close on the most

historic day. And that's one sharp gavel as trading come to an end on a historic day as British votes have rejected Europe. And markets haven't

reacted with extreme fear.

To the markets and how they just closed in New York. The Dow Jones Industrials having seen what happened in Europe where the FTSE, the DAX,

the CAC, the pound, were all sharply lower. The market opened down and it was over 500 points. It hit a low point of about 650 lower and it has just

closed of just 609. A loss of 3.38 percent. The biggest single daily fall in five years.

Interestingly when you look at that number, that 3.38 fall, it's in proportion to what we saw in the rest of the world's markets. There's the

Dow down 3.3 percent, but you saw for example the FTSE was off 3.15 percent. The Xetra DAX was down 6 percent, the S&P 500 off 3 percent.

Paris down 8 percent, Hong Kong down 2 percent. It was only the Nikkei, which had the worse day in five years which off 8 percent -- 7.9 percent.

And remember the Nikkei, the Shanghai and the Hong Kong, they were all trading as the results were coming in overnight from the U.K. referendum.

The U.K. itself bounced back from a 9 percent drop, down 3 percent at the end. And actually if we're being strictly honest about it, managed to gain

for the week overall. That's a slight bit of sophistry, because of course, earlier in the week there was some very sharp gains for the FTSE when it

looked as if "Remain" was going to win.

Other European indices did worse. They also saw the single biggest day fall since 2008. The banking shares in some cases, Barclay's for example,

RBS, they were down more than 20 percent or more with the exchange reporting extreme levels of selling. Over the course of this hour we are

going to give you a considered view of what was an extremely hectic trading day.

Alan Valdes is the director of floor trading at DME securities and joins me from the New York Stock Exchange for us tonight. Alan tell me why does a

British Brexit vote cause the Dow to lose 600 points?

ALAN VALDES, DIRECTOR OF FLOOR TRADING, DME SECURITIES: You know, I tell you, first of all it surprised a lot of traders. Even though it was a very

close polling coming out. To actually break away it was stunning. I mean, no one really predicted that. But the real reason behind this is U.S.

multi-internationals. I mean, our dollar now is so strong. It's great if you're going to London, your beautiful city on vacation, but if you're

selling some widget over there, you're going to have a hard time competing with the local markets. So that's going to hurt big time.

Our earnings coming out this quarter and you'll see it in unemployment numbers coming out. Our unemployment was weak to begin with. It could get

a lot weaker going forward.

QUEST: So in this environment, push it forward, never mind working backwards, is it likely -- Janet Yellen said that they would take notice of

this. If this volatility continues then Brexit, at least in the short term could take a July rate rise off the table.

VALDES: I don't think you'll see a rate rise the rest of the year. Remember, Britain's one thing and we're five tenths of our exports go to

Britain. So overall it's kind of small. But now you've got to look at the national movement out of France, the Five Stars out of Italy, Germany,

what's next? And that's where it's big. Because you know, the EU is our biggest trading partner. If they start to split up that becomes big

problematic problem, much bigger than yesterday's vote. So that we're going to keep a close eye on and see what that looks like going forward.

QUEST: Alan, do you think -- give me your opinion here, your judgement, your assessment -- do you think Brexit will be as bad as people say? Or is

going to be a lot of talk about -- much to do about nothing?

VALDES: Well no, it's not going to be much to do about nothing, but I mean today was the big day. We'll have to see what happens on Monday. If

Monday's a normal day, but you know what this just kind of fades away.

[16:05:00] Until we see what happens in France, in Italy, in Portugal, in Sweden, and in Germany, but if it's a one and done and everybody stays the

same, then it's going to take two years to unravel, two other years. I mean, we're years away until we see the full affect, but we have to see

that domino effect.

QUEST: Alan Valdes, thank you very much. Somebody's decided to stand in front of your camera. But that's the way it is. It is live from the Stock

Exchange, so you understand that.

George Soros warned of a Black Friday and sterling's fall is in fact worse than Black Wednesday happened in 1982. This is how the last 24 hours.

It's really quite interesting and quite significant because what you had during the course of the night -- it's worth us just mentioning this --

this blip of course where it did look as though "Remain" had actually won. And you did get the Pound going up to 1.50 at one particular point, and

then it falls off as it starts. Look, that's a low point, then it comes back up again, and then you actually get the result. So there was quite a

lot of movement. The pound has now hit its lowest level against the dollar in more than 30 years. And this market chaos is forcing the central banks

swing to contingency plans into urgent action. Who said what in the course of the day.

The Bank of England came out with a statement at 6, 7 o'clock in the morning, and then Mark Carney spoke. You'll hear from that. The ECB and

the Federal Reserve and the G7, have all pledged to provide increased liquidity. In the Bank of England's case, GBP 250 billion worth, according

to Mark Carney, is being made available.

What the central banks are determined to avoid is never mind the long-term question of a recession, is the short term question of liquidity and credit

markets seizing up as banks become wary of trading with each other. They want to avoid 2008 all over again. Mark Carney, the governor of the Bank

of England, said the bank is prepared as Britain builds new relationships with Europe and the rest of the world.

(BEGIN VIDEO CLIP)

MARK CARNEY, GOVERNOR, BANK OF ENGLAND: Her Majesty's treasury and the Bank of England have engaged in extensive contingency planning and the

Chancellor and I have remained in close contact, including through the night and this morning. To be clear, the Bank of England will not hesitate

to take additional measures as required, as markets adjust and as the U.K. economy moves forward.

(END VIDEO CLIP)

QUEST: Alex Stubb is the former finance minister, former Prime Minister of Finland. He joins me now via Skype. Alex, good to talk to you. You are a

committed European. I don't think I know anybody -- if we cut your leg off we would find the EU flag -- maybe second only to your national flag of

Finland, sort of ride the way through to the end. So how do you rate the U.K.'s decision? Because people like you when you're a PM and your fellow

PMs, you should've seen this coming and taken action sooner.

ALEXANDER STUBB, FORMER FINNISH FINANCE MINISTER: First of all, Richard, we actually have the Finnish flag in the mast in the back there. We're

celebrating Midsummer, it's 11 o'clock in the evening. I do think, Richard, that this is a historic moment. It's a little bit similar to the

end of World War II. Churchill speech about a federal Europe without the U.K., or a little bit like the Cold War. It's one of those defining

moments and in many ways it's sad for a pro-European like myself to see Britain leave the European Union. We're all very emotional here in the

morning, but now are trying to come to terms with the new situation. And I'm sure will be looking for constructive solutions.

QUEST: Is it likely that as the Brexit negotiations continue, some form of deal is cobbled together, some associate memberships, some second-tier form

of membership. Something that allows, in your view, a relationship between Britain and the EU to continue and maybe even in the future the question

being put again to the British people?

STUBB: Yes, I mean surely we are not going to let Britain go and Britain is knocking to let the EU go just like that. Because 50 percent of their

trade is with the EU. So some kind of a relationship will most probably form. What that relationship looks like it's very difficult to know. You

know the U.K., obviously, was part of EFTA before 1973 when they joined.

[16:10:01] Norway has a special relationship through a European economic area with the EU. But we don't know what is going to look like. And we're

probably looking at a period of uncertainty, certainly institutional uncertainty before we find out.

QUEST: As I listen today to, frankly, the Italian prime minister, the French president and finance minister, the Czech Prime Minister. Minister

after minister after minister saying there needs to be reform of the EU. There needs to be fundamental rethinking of the way the EU relates to its

member states. The one thing I thought, Alex, where were you saying this six months ago? Why did it take Brexit for you to say basically the EU's

broken?

STUBB: basically I think the EU always works in three phases. First, there's a crisis, then there is chaos, and thirdly, there is also a sub

optimal solution. And that's what probably we are looking at. I think in many ways there was a paradox in this. I think the vote was Democratic,

but in many ways it was also voted against globalization. And I'm not sure that the institutions of the nation states, let alone the European Union

are in it for the long run, are working.

You look at for instance the Internet generation that voted for membership and then the older generation that voted against it. You know, the EU is

an unfinished product. It will always continue in one way or another muddling through and in that sense it's always easy to look six months in

hindsight. They say we should have done this or that. No one knew about Lehman Brothers. No one knew about the euro crisis. No one knew about

Brexit either.

QUEST: That's a very depressing thought for an organization that is supposedly, frankly, Alex, looking to the future. That the best it can do

is deal with crisis and sub optimal solutions looking through the rearview mirror. When you put it like that it's not surprising that the British

decided to leave.

STUBB: Well, yes and no, but I guess the big question is if you really go for the philosophical tack to it, is how long do the institutions of

nation-states continue to provide the welfare that people want? If the nation-state can't do it, what's the next step? It's probably the European

Union. If the European Union can't do it, is it the larger global community? It's also a question of values. I mean, the EU and a lot of

Western nation states are about liberal democracy and about market economy. And now the British people just didn't believe that the EU can do it, or at

least 52 percent thereof. I still think that the EU institutions are valid. But I also agree with all those you say that they need to be

reformed. I would have just like to see them being reformed together with the U.K.

QUEST: Is it really 11 o'clock at night there?

STUBB: It is and it's still light. The sun is knocking to go down it all. And we even have a bonfire going if you want to see it.

QUEST: Next year I'll come and join you for it. Alex, good to talk to you, thank you.

Banking stocks have been some of the hardest hit in today's fall. Europe's financial sector is well and truly facing a meltdown. Not seeing since the

2008 crisis. Look at the banking stocks. The banking industry is vital to the U.K. it counts for about 8 percent of the economy. But Barclays which

had been down 30 percent at one point during the day, 29 percent, close down 17 percent.

Now to the reaction. J.P. Morgan's Jamie Dimon, sent a note to his staff saying, and the previously he'd said, they could consider moving as many as

4000 jobs to Europe, that he said when he was in Britain. Now he said, that it was one of the busiest days in the bank's history. It processed

1000 trading tickets per second. A 1000 per second.

Morgan Stanley is denying reports it's already begun to move jobs and says it will take time to implement any changes.

And Deutsche bank's chief executive says, "The full consequences a Brexit is not clear. No doubt, it's a negative on all sides."

Joining me now from New York, Howard Lutnick, the chief executive Cantor Fitzgerald. What do you make of Brexit? Are you going to move any jobs

out of London and are you about to start a much bigger operation in Frankfurt or Paris?

HOWARD LUTNICK, CEO, CANTOR FITZGERALD: Well, remember it's two years from when they give notice. And David Cameron said he's not can you give notice

until there's a new prime minister. So there's really absolutely nothing going on tomorrow or the next day. So anyone who talks about moving jobs

is really talking theoretically about the future.

[16:15:00] I didn't buy the fact this was all about globalization as the prior gentleman said. I think this was about immigration. I mean think

about it, Donald Trump is doing well in America talking about immigration and that's people breaking into the country, right, illegal immigration. I

mean, in London you come in on a train or a boat. You can just walk right in and go to the doctor and that I think was the key move. No passport in

London. Letting everybody come in. This was a vote on immigration and stopping it.

QUEST: But for the financial community, for your business, does Brexit make it more difficult and make you question whether or not your future

growth is in London.

LUTNICK: If the U.K. were to leave and if the U.K. were not to have a special trading relationship with Europe, which I find both preposterous.

My guess is they will create an association, and that association will allow Britain to be in the union, but passports to go back and forth. And

you can only move to the U.K. if you've got a work permit. I mean if you want to speculate about what happens if they don't do that. Then sure,

you'd have to have -- your growth would have to be -- in the U.K. certainly. But you would have to also grow, and we have a huge office in

Paris, and we would do more growth in Paris. Because that's part of the European Union.

But Europe is going to create an association. A special class for the U.K. and they're going to address this immigration. So mark my words, there's

going to be an association, whatever you call it.

QUEST: Hang on, hang on now. Why are you so sure about that? Bearing in mind that wasn't in the negotiations, or that wasn't offered back in

February to the Prime Minister. And Jean-Claude Juncker, and even today, Donald Tusk said there will be no renegotiation.

LUTNICK: Remember the key is if you're part of the European economic area, you still have to let everybody in. Norway lets everybody in. The U.K.

just voted to say I got to stop letting everybody in. They didn't vote against globalization. I don't buy that. I think they voted against the

fact that they used to have a two-week wait to see a socialized medicine doctor. Now they have a six-week wait, and the estimates were going to be

it was a 12-week wait to see a doctor. You know socialized medicine is for people who need it, who can afford it. And if you're going to make them

wait 12 weeks for an appendicitis that's a joke. So that's what they voted against. That's what I hear. That's what we talked about with our people.

Those with money voted to remain, and those without money who are waiting on line for the doctor were voting to leave because they want their doctors

back. They want immigration to stop getting in the way of their doctors.

QUEST: When you look at the market reaction today, I mean I think I'm looking -- we're looking at basically a knee-jerk reflex reaction aren't

we? Once cooler and calmer heads come in we'll probably see that most of those losses reverse. Would you agree?

LUTNICK: Oh, absolutely. Can you imagine the United States of America is down as much as the United Kingdom? How is it reasonable. What had

happened to us? The U.K., who we love, because they speak English, and they are our history. We love them, right. They voted to change the deal

with Europe because everybody is coming into Europe and they didn't like the terms of their deal. They're going to renegotiate some other deal.

But the U.S. -- I think it was just like when we talked about oil last time. You know, when we were together in Davos, Richard, the world was

coming to an end because oil prices had gotten cheap. And you and I talked about that that's ridiculous that eventually this will all wind out in the

U.S. stock market will come back. So our low interest rates and our growing economy -- you know the economists say this will take .1 off our

growth rate. Ok, let's face it, you and I were worried about .1 off our growth rate. I think the U.S. economy will continue to grow. It will be

volatile, which is very good for my company, BGC Partners, we love volatility. As you know, I've always said when it's busy and it's really,

really, really busy, we love it. But in the end, the U.S. market is a place to buy. I think you will look at 1750, 17,500 and you will think,

"You know what that was a good place to buy." I'm not saying tomorrow is going to go up, but just like last time were going to travel higher,

because low interest rates and a growing economy means an Ok stock market.

QUEST: I love your honesty. You relish volatility. Good to see you, sir, have a great weekend.

LUTNICK: Great to see you too.

QUEST: the financial turmoil in the U.K. was widely predicted. Nobody can say that it came as a surprise. George Soros warned about it, the IMF

warned about it, Christine Lagarde warned about it. Everybody warned that there would be volatility and an element of chaos if Britain voted to

leave.

[16:20:03] Today it was the Eurozone markets that bore the brunt. Belgian's finance minister will join me after the break and we'll talk to

him particularly about the sort of terms of trade and deal that he'll be looking at when it comes to the post-Brexit world.

(COMMERCIAL BREAK)

QUEST: Look at those losses on the market, 22 percent down for IAG that's British Airways. I'm going to go through them all, British Airways,

Iberia, Aer Lingus, and Vueling and IAG, Willy Walsh's group. The might have been the first out of the gate this morning with their profits warning

to the market.

Eurozone markets have been hit harder than any other region. Let's have at the Xetra DAX. So the DAX was down 6.8 percent. The CAC was down 8

percent. And the Athens General -- now the Athens General was well and truly clobbered, off 13.4 percent. So these three actually falling further

than in the U.K. itself. Compare the FTSE in London, which was off some 3 percent.

The euro also sinking against the dollar. Whether this is on a cross rate basis or it's because the dollar was strong against all comers as the haven

currency. But the euro fell. It got to 1.30 and 1.40 and then it ventures off about 1.11 and change. It fell 3 percent as they fear for the future.

Not so much of the single currency and the future of its survival, but obviously, the turbulence that will continue.

And then June 29th, next Wednesday, anybody who thinks there isn't change afoot just really needs to bear in mind what will happen on June 29th.

European Council President, Donald Tusk, says the first meeting to discuss Britain's exit will be on Wednesday. There'll be two meetings. First of

all, the Prime Minister David Cameron will brief the Council over dinner on the vote, and they'll be a starting of a discussion between them on how

things will move forward, and what the expectations from both sides. But then on the next morning on Thursday, there'll be a meeting that won't

include the U.K. Under the so-called Article 50 provisions.

The Italian finance minister told me, Europe has to admit when all is said and done the other 27 are part of the problem.

[16:25:00] (BEGIN VIDEO CLIP)

PIER CARLO PADOAN, ITALIAN MINISTER OF ECONOMY AND FINANCE: Europe appears to be part of the problem rather than being part of the solution, and this

is very worrying. We do badly need to revamp the European model. And I believe that Europe has all the energy and vision to do that. We must take

it on board.

(END VIDEO CLIP)

QUEST: on the line now is Johan Van Overtveldt, the Belgian finance minister. Minister, thank you, for joining us. Obviously, the results

today are not what any of you had wish for. But you have to move forward in the question now is, what does the other 27 do, if you like, accommodate

the British decision?

JOHAN VAN OVERTVELDT, FINANCE MINISTER, BELGIUM (via telephone): Well, good evening, or good afternoon. It's a tough question. It will be

discussed next week, all of just outlined. There is no written scenario what needs to happen now. We have Article 50, we refer to that, but we

will have to come down to a more precise scenario of how this is going to take place in reality. We have seen some moves today with Britain

referring to the two-year, what they can take for this Brexit to come to an end.

European authorities referring to a much shorter time period. So it's quite obviously, it's going to be a difficult negotiation to write down a

scenario.

QUEST: that was the interesting part today, because Britain obviously fires the trigger by invoking Article 50 of the Lisbon Treaty. But reading

Donald Tusk's comments and others and Jean-Claude Juncker's comments, it seems that the Union, or at least the Commission and the Council would

prefer a process to be got under way sooner rather than later. Is that your preference?

OVERTVELDT: I think we need something that has to be worked out very carefully. I prefer something that takes somewhat more time, but it's very

precise, very well thought through, than some quick action that might lead us to another problem or too many other problems. So is a question of

balance between going forth with it and going forth with it in a well thought out way. And that will probably take some time. It's hard to say

now whether it will be six months or a year or whatever. But let's think it out carefully and let's keep in mind, which I think is one of the major

lessons that we should all should be looking at now is that we have to admit that the European model needs a rescheduling and a very thorough

rescheduling.

QUEST: Would you be in favor of some sort of second-tier status, of associate status? Do you imagine that the final deal for Britain's exit

does have some form of relationship, continued relationship with the United Kingdom?

OVERTVELDT: I would very much prefer that, because it's not only one of the largest economies of the European continent with a lot of history and

historical ties with mainland Europe. So we should try to keep that intact. So we should certainly go for an agreement or several agreements

with the U.K. like we have with other countries. There are other important countries around the European Union, referring to Switzerland and Norway,

which we also have all kinds of agreements. And we should certainly not set ourselves loose or cut the U.K. loose from us. There still much need

in a good relationship a forward good relationship between us and the U.K. And that certainly should be one of the objectives of the negotiations to

keep a good relationship in another institutional form intact.

QUEST: Minister, thank you very much. We appreciate that you had a busy day and you're probably going to have a very busy weekend working out the

implications of all of this. And I appreciate you giving me time, thank you, sir.

QUEST MEANS BUSINESS, Black Friday is one of the ways in which it's been described. When we come back were going to look at the global markets.

Will put it into the context, the wider issue. What on earth happened today and how on earth does everybody get out of this mess.

[16:30:00] (COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, of course there's more QUEST MEANS BUSINESS in just a moment. When Mohamed El-Enan, will be joining us on the

day where the Dow dropped more than 600 points. And President Obama promises the special relationship between Britain and the United States

will continue. For that this is CNN and on this network the news always comes first.

Stocks around the world fell sharply. Some would say plunged in the wake of Britain's vote to leave the EU. On Wall Street the Dow logged its worse

single day in five years. European markets had their worst day since the financial crisis. Banking shares were creamed. Some fell by 20 percent or

more.

The British Prime Minister David Cameron announced his resignation saying the U.K. needs fresh leadership. It's not clear when he'll step down, but

he does want a new leader in place by the Conservative Party conference in October. Mr. Cameron promised to offer the referendum during his campaign

for reelection last year.

The Rio lab that was supposed to conduct drug testing on Olympic athletes has been suspended. The world anti-doping agency remove the accreditation

of this facility to what it called nonconformity with lab standards. Blood and urine samples will be sent other labs for analysis.

CNN's Nick Paton Walsh joins us now from Rio. Nick, was this the lab that I saw in your report, I think it might've been either yesterday or the

previous day.

NICK PATON WALSH, CNN SENIOR INTERNATIONAL CORRESPONDENT: Absolutely, and it is one that has had millions spent upon it. Now what is striking about

what WADA is saying just in the last few hours, is when you push them -- this is in some sort of slow issue that's been building over a period of

time. Normally these laboratories have a chance to have various misdemeanors and a point system. If they get to a certain threshold, then

a suspension kicks in. It's not that, says a spokesman, it appears to be one serious issue that has caused the suspension.

Now we have just heard from the laboratory themselves. They say they will continue their clinical excellence and they only heard about this today.

That's strange because WADA talked about having notified them two days ago. But they expect a new inspection to exonerate them and to able to function

for the Olympics. But WADA themselves said there is a possibility they may not be ready in time. So something clearly, very serious has happened at

this facility to cause WADA to be deeply concerned. I should say again, the laboratory says, they are involved in a pursuit of excellence in what

they do. So effectively it can amount to some degree there. But, Richard, you know, I have to tell you we don't need another problem for these

Olympics. And we certainly don't need it to be involved in the arena of doping. And that's what so key here. Russia are struggling to get its

athletes through a reinvigorated testing system. If they're allowed to get anyone here and compete in the track and field people banded still

potentially. And real concerns I think that this just adds to a whole list of problems are going to be facing.

QUEST: Right, Nick Paton Walsh in Rio, thank you, sir.

The IMF Managing Director Christine Lagarde admits she does not know how the U.K.'s relationship with the EU will look. Now Britain has voted to

leave.

[16:35:05] in an earlier statement Christine Lagarde said the IMF would be monitoring the situation very closely to ensure the global economy remain

stable.

(BEGIN VIDEO CLIP)

CHRISTINE LAGARDE, MANAGING DIRECTOR, IMF: it will be some time until we know the nature of the future relationship between the United Kingdom and

the European Union. In the meantime, it will be important that there be clarity on the negotiation process and that it be carried in as smooth a

manner as possible.

(END VIDEO CLIP)

QUEST: Mohamed El-Enan is chief economic advisor, Allianz. He joins me now live from Irvine, California. Oh woe is us, how on earth did we manage

to end up in this mess. First of all, how big a mess is it? And how bad do you think Brexit's going to be?

MOHAMED EL-ENAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: It's a mess because you are introducing institutional uncertainty in the largest economic region in

the world to a global economy that was already facing economic fragility and financial uncertainty. So this could be a tipping point moment. There

is a silver lining and the silver lining, Richard, is that this proves to politicians that when you run advanced economies at low non-inclusive

growth strange things happen and these could be very disruptive. The hope that this is a wake-up moment for the political elites, but it's going to

come at a big cost.

QUEST: Britain's ability to thrive, not survive, I mean even the British Prime Minister David Cameron said he's got no doubt that the U.K. will

survive quite well but the ability for Britain to thrive. Do you give credence to the worst prognosis that we've heard about what will happen to

the U.K. economy?

EL-ENAN: If you take me out 3 to 5 years I would project that the U.K. regains its economic and financial footing. That is a part of an

association agreement with the rest of Europe and is doing just fine. The problem is that's in 3 to 5 years. The next few months are going to be

incredibly disruptive. So the short term is worrisome. The longer term is fine for the United Kingdom. But it's going to go through a period of

major adjustments.

QUEST: As for the -- the U.K.'s fine now let's talk about the other guy. As for the Europeans, what lesson do they need to learn? You talk about

this sort of low growth environment, or to use your phrase, non-inclusive environment. But they pontificate endlessly about the need for inclusive

growth and lower unemployment. So which bit of the plot are they missing?

EL-ENAN: So their missing the political well to implement. And engineering solution that most economists agree on. You know, three

mistakes were made. The first one is not to respond to this low growth equilibrium, the new normal. And instead rely on the European Central

Bank. But the European Central Bank cannot deliver high inclusive growth no matter how hard it tries. The second mistake they made, they didn't

take seriously the coupling of the political and business elites an expert opinion from the people in the street. And finally they got married with

someone who had a fundamentally different vision of what the EU meant. For Britain the EU was nothing more than a free trade zone. For the rest it

was something much more than that.

QUEST: When you woke up this morning, actually you are probably still awake because it was late at night. It was only midnight in California.

Tell me what your gut feeling was when you heard Brexit.

EL-ENAN: So first right after the polls closed the markets behaved as if they were sure that the remain camp had won. And I thought, wow, are

markets really that smart? I wonder what they're picking up that no one else is seeing. And we saw the pound go up to 1.50. And the Sutherland in

the Newcastle results came in and there that was this realization. And then it was fascinating. I early on had a sense that this one would be

different. Because some of my friends who I respect greatly, were going to vote leave. And these are educated people who are part of the financial

system and they just were voting on one issue alone and that's immigration. And whenever something comes down to one issue, you can get some pretty

unexpected outcomes.

[16:40:00] QUEST: Have a lovely weekend even with Brexit upon us. Thank you for joining us, sir, thank you.

EL-ENAN: Thank you.

QUEST: Quentin Peel is with me, of Chatham House, the world Institute of international affairs. Quentin, you had a year or two of looking at this.

Even with that this is something different. What did you think when you heard Brexit?

QUENTIN PEEL, ASSOCIATE FELLOW, CHATHAM HOUSE: I was sick. I was really sick and my gut. I feared it was going to happen, because you can see how

close things were for three months. It's been really touch and go. But this is the crisis, the shock to the system that we really didn't need and

this was a shot that was self-inflicted.

QUEST: It's arguably a shot to the European system that they really did need if they're going to make any form of fundamental structural change.

PEEL: There is certainly, I have friends in Berlin for example, who believe exactly that. But only with a mega shot like this, will they get

the sort of fundamental change they need. But I think they're coming from a point of view that says we need to really make big steps forward in

integration of the euro center on some.

QUEST: Donald Tusk said last week -- two weeks ago he said, "the European institutions, the EU needs to realize the rest of Europe is not as in love

with integration as we are." He then said in a speech just this week, "If we don't get our act together this whole thing is coming down around our

ears."

PEEL: Yes, but get our act together is a very loose and vague phrase. We don't know what it means. And actually that's the problem. The European

Union is facing three fundamental crises. They Eurozone crisis is still there with us, not resolved, not stabilized. The refugee crisis, huge in

terms of domestic political reactions, and the Russia crisis. Three things unresolved and now we have the Brexit crisis which is actually the crisis

of a populous backlash.

QUEST: Isn't it the failure of the European Union, particularly on the Eurozone crisis, the sovereign debt crisis, the Greek crisis, the Eurozone

crisis, the slow growth crisis, since we're a business program last stick to the economics. Isn't it the failure of the European institutions to

deal with that in a timely, competent fashion. Not eight years after the great recession's over that leads to these results.

PEEL: I think you can put the Eurozone crisis into that category. I would not put the refugee crisis and the Russian crisis.

QUEST: that's why am talking about the economic issues. Greece, I mean how many times would they like to bite the Greece cherry before they

actually get it right.

PEEL: I do think that one needs to recognize that the Greek crisis was originally self-inflicted. And therefore the problem has got to be solved

in Greece as much is in Brussels. And that has been the tension, really. But behind it there really is a deep tension, which is that Germany and

France, the real core members of the Eurozone, don't fundamentally agree on how to run an economic and monetary union. Germany wants much more of a

fiscal union and only then will they be prepared to sign off on loans to everybody else. Whereas France, wants the loans without the fiscal union.

QUEST: And we wish you, sir, a good weekend.

PEEL: Thank you.

QUEST: Thank you very much indeed. We'll continue our coverage tonight. The British Prime Minister's resignation. If the night hadn't been lively

enough, the early morning shock from Downing Street took us into the stratosphere.

(COMMERCIAL BREAK)

[16:45:37] (BEGIN VIDEO CLIP)

DAVID CAMERON, BRITISH PRIME MINISTER: I will do everything I can as Prime Minister to steady the ship over the coming weeks and months. But I do not

think it will be right for me to try to be the captain that steers our country to its next destination.

(END VIDEO CLIP)

QUEST: Well that was a morning shocker for you when David Cameron decided he's off in the coming months after the U.K.'s decision to leave the EU.

And the avid leave campaigner, Boris Johnson, he was booed by remain voters. It's not exactly an auspicious start if you want to be the Prime

Minister. That you have to be escorted from your house through a line of policeman.

Adam Afriyie is a Member of Parliament for the Conservative Party. Forgive me I don't have your constituency.

ADAM AFRIYIE, MEMBER OF PARLIAMENT, CONSERVATIVE PARTY: Windsor, the Queens district, you see.

QUEST: But she doesn't vote so --

AFRIYIE: No I am her subject. She's a resident and I am her subject.

QUEST: Adam, were you surprised, first of all, that the PM went.

AFRIYIE: Do you know I was and I think a lot of us have been encouraging him not to leave straightaway where the votes if he lost. Because I think

we need a greater stability now. And I think he's been a great Prime Minister and really difficult circumstances.

QUEST: Oh, he's been a great Prime Minister, he's just called the referendum that brought the house down around your ears.

AFRIYIE: Well not at all. What's happened is the public -- I was listening to you earlier --

QUEST: You're a Brexiteer.

AFRIYIE: Oh, very much so. Look, the public has spoken. Democracy can be very inconvenient sometimes. Look, this is the tension we see between the

business markets and the investment markets, and actually what one wants in a democracy. I think it's a great result for the people. And now we need

to be calm, methodical and implement their wishes.

QUEST: George Soros was right when he said the pound is going to fall. He said 15 percent and it was 9 percent today. We've had a profits warning

from IAG, the British Airways, down 20 percent. Barclays down 15 percent. It's hard to see immediately that you've actually succeeded in doing

anything other than make a bad situation worse.

AFRIYIE: Yes, I think the decision the British people have made is a long- term decision. I don't think it's about immigration, I think overall it's about control. So in the short term we always said there will be market

fluctuations. I think the pound moving around right now, because the markets were surprised that the public actually had a mind of their own.

So it's inevitable that there will be some market fluctuations. But in the longer term as your previous guests said, actually I think that the

prognosis is very positive if we're able to adapt to the modern economic environment.

QUEST: But you do accept that the future -- the world trade option -- WTO option is, yes it's a theoretical possibility, but to trade with your

partner 32 miles across the water on a WTO basis, when they are trading parties as single market is not a real runner.

AFRIYIE: I think we don't know what the trading relationships will be, but what I do know is Prime Minister's trade envoys are gone. I travel around

West Africa lot. Every president I've met, every Prime Minister, every trade minister says wants to have a better relationship with us. So I

think those are the opportunities, bigger opportunities looking up, and also the world as well as continue to trade with Europe.

QUEST: So now the civil service, the trade department has to grow. Because you've got to now negotiate all your own trade agreements. The

whole thing has to grow doesn't it? Time is not going to be easy.

AFRIYIE: absolutely right, and the trade departments will all have to grow. But do bear in mind, Richard, we do not have to have signed free

trade agreements in order to trade. So part of it is about our attitude is a government and as a Parliament, and as a country about how we look at the

world. And I think now that we've made this decision to reshape European history, to perhaps even change the way the entire European project works,

we can trade with the rest of the world, and look out for the rest of the world.

QUEST: In a word, or a sentence, earlier in the evening it not likely had lost, by Sunderland, Newcastle, Middlesbrough, Basildon, it was clear that

you'd won. In a word what was it like?

[16:50:00] AFRIYIE: I was ecstatic and I'm cautiously optimistic. What we need now is stability in a very clear plan and a swift plan for how Britain

gets itself back on top. Great year.

QUEST: have a good weekend, sir.

AFRIYIE: You too.

QUEST: United Kingdom may have never been so divided whatever way you look at it. Scotland's going to go on a frolic of its own. Northern Ireland

who knows where. England is clearly Brexiting. And London it firmly remain. How do you put Humpty Dumpty back together again?

(COMMERCIAL BREAK)

QUEST: Forty years since Britain last voted on its place in Europe. That was 1975. The Labour Party led the charge to take Britain out of the

European economic community. They lost by a landslide. Since then much is changed. This new vote shows just how divided the United Kingdom has

become. CNN's Nick Glass.

(BEGIN VIDEOTAPE)

NICK GLASS, CNN CORRESPONDENT (voice-over): So after 43 long years the restlessness has found a voice. Britain has turned its back on Europe. A

seismic decision but a vote that could hardly have been more divisive. The remain campaign is blue. Took Scotland and Northern Ireland and London,

but the rest of the country went red and voted to leave. The map then has a stark division. We call it the United Kingdom but after this how united

is it? Britons are split. Those that see themselves as British. Those that see themselves as Europeans.

Britain joined the European Union in 1973 when they were just eight other members. The Conservative Prime Minister Edward Heath signed the document.

Within two years the new Labour government was asking voters to think again should Britain be in or out. Throughout the 43 years the relationship has

been intermittently fractious. Britain gained economically but quarreled over money and subsidies. Not least under the leadership of another

Conservative Prime Minister, Margaret Thatcher. In 1992 Britain stayed in the club but declined to join the common currency, the euro.

DAVID CAMERON, BRITISH PRIME MINISTER: It is time for the British people to have their say. It is time for us to settle this question about Britain

and Europe.

GLASS: Cameron's evident motive was to quell the Eurosceptic voices within his own party and make the case against UKIP, the far right independence

party.

BORIS JOHNSON, LEAVE CAMPAIGNER: I will be advocating vote leave, whatever the team is called.

GLASS: Superficially the referendum was a story of blonde ambition. A political heavyweight, the Conservative Boris Johnson, coming out for the

leave campaign. The cartoonist just reveled in it. Rolling the dice, vote leave wrestling the remain down the hill. Steaming down the line, Boris at

the controls of the Brexit express, and anxious Cameron rope to the rails.

[16:55:00] JOHNSON: I believe that this Thursday will be our country's independence day.

GLASS: as a media story the focus was the gladiatorial battle between conservative politicians. But the truth is Brexiteers tapped into

something, a genuine anxiety about immigration. This in the middle of the greatest refugee crisis in Europe since 1945. The campaign was sometimes

better. Sometimes nasty. It stirred social divisions, between classes, between town and country, between old and young, between generations of the

same family.

Back in 1975 when British voters last put an X to a ballot paper on Europe, there was a resounding yes in favor of membership, 67 percent for, 33

percent against. What a profound shift now, 48.1 percent to stay in, 51.9 percent for leaving. No one quite knew it until the question was asked.

Britain has quietly become utterly polarize over Europe. This referendum has made it abundantly, transparently, divisively clear. Nick Glass, CNN,

London.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

QUEST: It happened today. I came to work on the Tube. I bought my lunch Marks & Spencer's. The lights in the office worked. A lot of ordinary

things happened on a very extraordinary day. And that's what is going to be like as this Brexit process gets underway. And that's tonight's QUEST

MEANS BUSINESS. I'm Richard Quest in London.

END