Pound plunges as Cameron makes pro-EU case in U.K. Parliament

LONDON -- A vote by Britain to leave the European Union would be a "final decision" with unknown consequences, Prime Minister David Cameron warned Monday, as uncertainty over Britain's future in the bloc sent the pound plunging on currency markets.

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Cameron told lawmakers in the House of Commons that the June 23 referendum "is a straight democratic decision: staying in or leaving."

He tried to quell doubts about remaining in the EU among many of his Conservative lawmakers, saying that leaving would be "a great leap into the unknown" that could harm Britain's economy and security.

"Leaving the EU may briefly make us feel more sovereign," he said, but argued: "We're better off fighting from the inside."

The pound fell 2.1 per cent to $1.4106 Monday, after touching a seven-year low of $1.4058, and also sagged 0.5 per cent to 1.28 euros, as bookmakers shortened the odds on a vote to leave -- though betting markets still favour a "remain" victory.

UBS Wealth Management said Monday it put the probability of a British EU exit -- known as "Brexit" -- at 30 per cent.

Simon Smith, chief economist at FxPro, said the next four months "won't be a fun time" for the pound, which has weakened in recent months.

"It's more the uncertainty that will weigh on the currency, rather than investors taking a view on the outcome and the implications for the economy, which are hard to argue either way," he said.

Many big businesses have warned that leaving the EU -- with its open internal market of 500 million people -- would hammer the British economy. But London Mayor Boris Johnson, a high-profile supporter of an "out" vote, said fears of economic catastrophe were "wildly exaggerated."

He likened the predictions to those who had issued apocalyptic warnings that if Britain did not join the euro single currency, the City of London financial district would suffer and "great mutant rats would gnaw the faces of the last bankers."

However, Johnson suggested his goal is to vote to leave, then reopen negotiations on terms for remaining in the EU.

"There is only one way to get the change we need -- and that is to vote to go; because all EU history shows that they only really listen to a population when it says 'no,"' he wrote in the Daily Telegraph.

Cameron tried to banish that notion, telling lawmakers that ignoring a popular vote to leave "would not just be wrong; it would be undemocratic."

Comparing the relationship with Europe to a marriage, he said "I don't know any (couples) who have begun divorce proceedings in order to renew their marriage vows."

The rhetorical stakes shot sky-high as politicians began a four-month battle to sway British voters ahead of the referendum, with the opposing sides battling over whether EU membership made Britain more or less safe from terrorist attacks.

Former Conservative leader Iain Duncan Smith said Sunday that the EU's "open border," and the inflow of millions of migrants from the Middle East and Africa, made it more likely terrorists could slip into the U.K. -- though Britain is not part of the EU's borderless Schengen zone.

But Defence Secretary Michael Fallon argued that EU membership makes the U.K. safer.

"It is through the EU that you exchange criminal records and passenger records and work together on counter-terrorism," Fallon told the BBC Monday.

"We need the collective weight of the EU when you are dealing with Russian aggression or terrorism. You need to be part of these big partnerships."

He was echoed by Rob Wainwright, director of the European police co-operation agency Europol, who said that if London turns its back on the EU and the police co-operation capabilities it offers, "it would make the U.K.'s job harder, I think, to protect the citizens from terrorism and organized crime."

Cameron say a deal he struck Friday with 27 other EU leaders gives Britain "special status," exempting the U.K. from ever-closer political bonds within the bloc and protecting the rights of the pound against the euro currency used by 19 EU countries.

Other European leaders have sometimes expressed annoyance at Britain's demands, but want the U.K., with its economic and diplomatic clout, to remain in the bloc.

Italian Prime Minister Matteo Renzi said Monday that he hoped "good sense will prevail" in the British referendum.

Cameron's governing Conservative Party is deeply split on the issue, with as many as half of Tory legislators -- and at least six of the 23 members of Cameron's Cabinet -- in favour of leaving the EU.


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