Europe's leaders have vowed no compromise on the terms of their divorce with Britain as a free-falling pound on Friday dramatically underscored the perils ahead for Prime Minister Theresa May's government. French President Francois Hollande sent one of the strongest warnings yet that Britain will have to pay a heavy price for leaving the European Union, while European Commission chief Jean-Claude Juncker said the bloc must be "unyielding" in the face of London's demands.
Hollande called for "firmness" by the EU powers in Brexit negotiations to avoid the risk that other countries might seek to follow Britain's lead and leave the bloc. "There must be a threat, there must be a risk, there must be a price, otherwise we will be in negotiations that will not end well," he said in a speech Thursday evening. His message was hammered home Friday by Juncker, who said the 27 nations Britain was leaving behind must not give way easily in what are set to be tense negotiations.
"You can't have one foot in and one foot out," Juncker told a conference in Paris, warning that Britain risked "trampling everything that has been built" over six decades of European integration. "We must be unyielding on this point. I see the manoeuvring (by Britain)," he added.
Hollande's comments added to pressure on the pound on financial markets, with the British currency suffering its biggest drop since Britain voted in a June referendum to leave the EU. In Asian trading the pound plummeted by 6 percent for a couple of moments to hit a 31-year low of $1.1841, recovering to $1.2364 in late morning European trading.
The firm response from Europe followed May's announcement that her government will trigger Brexit negotiations by the end of March, putting the country on course to leave the EU by early 2019. May said Wednesday she wanted an exit deal that offered Britain "maximum freedom" to operate in Europe's single market while also maintaining control over immigration.
The idea that Britain wants to leave the EU but keep some of its advantages is visibly angering fellow member states. In his speech, Hollande noted that a previous British prime minister, Margaret Thatcher, had in the 1980s obtained a rebate on Britain's EU contributions worth billions of pounds every year. Thatcher "wanted to remain in Europe, but receive a cheque in return," he said.
"Today, Britain wants to leave, but does not want to pay anything. That is not possible," he said. May's government and her Conservative party are divided over whether to go for a "hard" or "soft" withdrawal from the EU. "Hard" Brexit would mean quickly severing all links with EU institutions and pulling out of the single market, relying instead on World Trade Organisation rules to trade overseas.
Supporters of a "soft" Brexit, on the other hand, foresee a future where Britain would retain some form of membership of the EU single market in return for allowing a degree of free movement for workers from EU countries. The Open Britain group, an offshoot of the 'Remain' campaign which lost the referendum, said the pound's fall showed the markets had been "spooked" by talk of a "hard" AFP.
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