By Laura Cohn
June 28, 2016

As the Brexit vote shot more shockwaves through the financial markets, pressuring the FTSE100 Index, sending the British pound to its lowest level against the dollar in over three decades, and leading S&P and Fitch to downgrade the U.K.’s credit rating, a spotlight is shining on Angela Merkel.

The German chancellor, who heads Europe’s strongest economy and has the longest tenure of any EU leader, reacted to the Brexit crisis by urging caution. Reuters Breakingviews said it was the right call. And Adam Posen, the well-respected president of the Peterson Institute, told Bloomberg TV Merkel is “behaving like the states person she is—the grown-up in the room.”

While she’s arguably Europe’s most powerful leader, she faces a ticklish task. Having faced criticism over her positions on austerity in the eurozone and the Greek bailout, she can’t afford to be overly aggressive on Brexit. Merkel, whose country is now likely to become the U.S.’s key ally in Europe, also wants to prevent other nations from leaving the bloc.

So diplomatically, Merkel, who hosted the French and Italian presidents in Berlin yesterday, has signaled she wants key discussions about the mechanics of Brexit to occur among EU leaders in Brussels. Today, Prime Minister David Cameron will address the officials in the Belgian capital. But tomorrow, there will be a summit of 27 EU leaders. That’s right—27 leaders. Britain won’t be attending.

Laura Cohn

@laurascohn

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