Britain's Prime Minister David Cameron speaks after Britain voted to leave the European Union, outside Number 10 Downing Street in London
By Guy Faulconbridge and Kate Holton
LONDON (Reuters) - Britain has voted to leave the European Union, forcing the resignation of Prime Minister David Cameron and dealing the biggest blow since World War Two to the European project of forging greater unity.
Global financial markets plunged on Friday as results from a referendum defied bookmakers' odds to show a 52-48 percent victory for the campaign to leave a bloc Britain joined more than 40 years ago.
The United Kingdom itself could now break apart, with the leader of Scotland - where nearly two-thirds of voters wanted to stay in the EU - saying a new referendum on independence from the rest of Britain was "highly likely".
German Chancellor Angela Merkel will meet French, German and Italian leaders in Berlin on Monday to discuss future steps, and foreign ministers of the bloc's six founders -- Germany, France, Italy, Belgium, the Netherlands and Luxembourg -- will meet on Saturday morning.
An emotional Cameron, who led the "Remain" campaign to defeat, losing the gamble he took when he promised the referendum in 2013, said he would leave office by October.
"The British people have made the very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction," he said in a televised address outside his residence.
"I do not think it would be right for me to be the captain that steers our country to its next destination," he added, choking back tears before walking back through 10 Downing Street's black door with his arm around his wife Samantha.
The pound fell as much as 10 percent against the dollar to touch levels last seen in 1985, on fears the decision could hit investment in the world's fifth-largest economy, threaten London's role as a global financial capital and usher in months of political uncertainty. The euro slid 3 percent.
World stocks saw more than $2 trillion wiped off their value although Britain's FTSE 100 stock index recovered much of its early losses. U.S. stocks fell sharply, with the Dow Jones industrial average dropping over 500 points.
INVENTING ANOTHER EUROPE
Quitting the world's biggest trading bloc could cost Britain access to the trade barrier-free single market and means it must seek new trade accords with countries around the world. A poll of economists by Reuters predicted Britain was likelier than not to fall into recession within a year.
The EU rose out of the ashes of two world wars and fascist and communist totalitarianism to unite a continent of democracies. It faces economic and political damage without Britain, which has the EU's biggest financial centre, a U.N. Security Council veto, a powerful army and nuclear weapons.
"It's an explosive shock. At stake is the break-up pure and simple of the union," French Prime Minister Manuel Valls said. "Now is the time to invent another Europe."
Merkel called it a watershed for European unification.
The result emboldened eurosceptics in other member states, with French National Front leader Marine Le Pen and Dutch far-right leader Geert Wilders demanding their countries also hold referendums. Le Pen changed her Twitter profile picture to a Union Jack and declared "Victory for freedom!"
The vote will trigger at least two years of divorce proceedings with the EU, the first exit by any member state. Cameron, in office since 2010, said it would be up to his successor to formally start the exit process.
His Conservative Party rival Boris Johnson, the former London mayor who became the most recognisable face of the Leave camp, is now widely tipped to seek his job.
"We can find our voice in the world again, a voice that is commensurate with the fifth-biggest economy on Earth," he told reporters at Leave campaign headquarters.
Lawmakers from the opposition Labour Party launched a no-confidence motion to topple their leader, leftist Jeremy Corbyn, accused by opponents in the party of campaigning tepidly for its Remain stance.
There was euphoria among Britain's eurosceptic forces, claiming a victory over the political establishment, big business and foreign leaders including U.S. President Barack Obama who had urged Britain to stay in.
"Let June 23 go down in our history as our independence day," said Nigel Farage, leader of the eurosceptic UK Independence Party, describing the EU as "doomed" and "dying".
The shock hits a European bloc already reeling from a euro zone debt crisis, unprecedented mass migration and confrontation with Russia over Ukraine. Support for anti-immigrant and anti-EU parties has surged across the continent.
U.S. presidential candidate Donald Trump, whose own rise has been fuelled by similar anger at the political establishment, called the vote a "great thing". Britons "took back control of their country", he said in Scotland where he was opening a golf resort. He criticised Obama for telling Britons how to vote, and drew a comparison with his own campaign.
Obama said he had spoken with Cameron and that the United States' relationship with Britain would endure.
"While the UK's relationship with the EU will change, one thing that will not change is the special relationship that exists between our two nations," he said in a speech.
Britain has always been ambivalent about its relations with the rest of post-war Europe. A firm supporter of free trade, tearing down internal economic barriers and expanding the EU to take in ex-communist eastern states, it opted out of joining the euro single currency and the Schengen border-free zone.
Cameron's ruling Conservatives in particular have harboured a vocal anti-EU wing for generations, and it was partly to silence such figures that he called the referendum.
The 11th hour decision of Johnson - Cameron's schoolmate from the same elite Eton private boarding school - to come down on the side of Leave gave the exit campaign a credible voice.
World leaders including Obama, Merkel and Chinese President Xi Jinping, NATO and Commonwealth governments had all urged a Remain vote, saying Britain would be more influential in the EU.
The four-month campaign was among the most divisive ever waged in Britain, with accusations of lying and scare-mongering on both sides and rows over immigration which critics said at times unleashed overt racism.
At the darkest hour, a pro-EU member of parliament was stabbed and shot to death in the street. The suspect later told a court his name was "Death to traitors, freedom for Britain".
The campaign revealed deep splits in British society, with the pro-Brexit side drawing support from voters who felt left behind by globalisation and blamed EU immigration for low wages. Older voters backed Brexit; the young mainly wanted to stay in. London and Scotland supported the EU, but swathes of England that have not shared in the capital's prosperity voted to leave.
Support for Remain among Scots prompted Scottish First Minister Nicola Sturgeon to declare it "democratically unacceptable" for Scotland to be dragged out of the EU, two years after voting to stay part of the United Kingdom. "I think an independence referendum is now highly likely," she said.
The financial turmoil comes at a time when interest rates around the world are already at or near zero. The shock could prevent the U.S. Federal Reserve from raising interest rates as planned this year or even provoke a new round of emergency policy easing from central banks.
Left unclear is the relationship Britain can negotiate with the EU. EU officials have said UK-based banks and financial firms could lose automatic access to sell services in Europe.
Huge questions also face the millions of British expatriates who live freely elsewhere in the bloc as well as millions of EU citizens who live and work in Britain.
(Additional reporting by William James, Kylie MacLellan, Sarah Young, Alistair Smout, Costas Pitas, Andy Bruce and David Milliken in London, and Steve Holland in Turnberry, Scotland; Writing by Mark John and Pravin Char; Editing by Peter Graff and Anna Willard)