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EU Commission President Jean-Claude Juncker (L) and EU Council President Donald Tusk (R) talk prior to the EU Summit meeting at the EU headquarters in Brussels on June 29, 2016.JOHN THYS/AFP / Getty Images

European leaders have insisted they will set the terms of the EU's split from Britain, rejecting suggestions by British Prime Minister David Cameron that informal discussions can take place.

The European Union is under pressure to prove to its 27 remaining members that it will act decisively with Britain and not encourage other countries to follow suit.

On Wednesday, Donald Tusk, president of the European Council, which is made up of the leaders of each EU country, shot down two key arguments made by Brexit supporters: that Britain can start informal talks before triggering formal withdrawal and that it can join the EU's single market without accepting unfettered freedom of movement.

"We reconfirmed that Britain's withdrawal from the European Union must be orderly and there will be no negotiations of any kind until the U.K. formally notifies its intention to withdraw," Mr. Tusk told reporters in Brussels, after EU leaders met for the first time without Britain. "Leaders made it crystal clear today that access to the single market requires acceptance of all four freedoms, including the freedom of movement. There will be no single market à la carte."

Earlier on Wednesday, Mr. Cameron told the House of Commons that informal discussions could take place.

"They have said no negotiation without notification, but I don't think that excludes discussions that a new prime minister can have with partners or indeed with the institutions so that we continue to get off on the right foot," he said.

Mr. Cameron added that Britain should push for as close a relationship as possible with the EU, but acknowledged that gaining access to the single market without accepting free movement will be difficult.

Nicola Sturgeon, the First Minister of Scotland, met with European officials in Brussels on Wednesday, pleading her case for Scots to stay in the EU. She drew a mixed response, and faced outright opposition from Spain.

Ms. Sturgeon has said Scotland, where voters favoured remaining in the EU by a near 2-1 majority, must not be kicked out against its will. She wants to negotiate directly with the bloc to protect the membership rights of Scots, and is open to an independence referendum if that is the only way to keep Scotland in the EU.

"I have been heartened today to hear a willingness to listen," she told reporters.

Mr. Cameron campaigned vigorously for Britain to stay in the EU, and he announced last week that he will step down, after 52 per cent of voters backed VoteLeave in last Thursday's referendum.

The leadership race to succeed him formally started on Wednesday and there are already deep divisions over how Britain will exit the EU. Up to eight MPs are expected to put their names forward. The Conservative Party's 330 MPs will elect two of them to go forward as candidates to the party's membership and one will be selected as leader in a vote via postal ballots that will conclude by Sept. 9.

Conservative MP Boris Johnson, who led the Leave campaign, is considered a front-runner. He has remained largely out of public view since the referendum, but in an article in the Telegraph this week, Mr. Johnson said Britain would keep access to the EU market but adopt a points-based immigration system like Canada's.

"British people will still be able to go and work in the EU; to live; to travel; to study; to buy homes and to settle down," he wrote, adding that there would also be "a balanced and humane points-based system to suit the needs of business and industry."

The Labour Party is also in disarray, with its leader, Jeremy Corbyn, refusing to step down despite a revolt from most of the party's MPs. He has support from some large unions, and a couple of public rallies have been held by Labour Party members and others encouraging him not to resign.

Mr. Corbyn said on Wednesday that he will stick it out, noting "there are many in the party who may not completely agree with the direction I want to take us." But he said he had a mandate from thousands of party members who "wanted to see a politics that is more reflective of them and their lives."

Nonetheless, MPs are expected to start a leadership process as early as Thursday, when Angela Eagle, a senior Labour lawmaker, will announce that she will challenge Mr. Corbyn, according to media reports.

All of this came as financial markets roared back after slumping in the wake of the referendum results. London's FTSE 100 closed up 3.6 per cent on Wednesday, and has gained back all of its losses since Friday. North American markets have also rallied, and the pound has regained much of the value it lost earlier this week when it hit a 31-year low against the U.S. dollar.

However, the overall economic picture for Britain remains uncertain. The major bond-rating agencies have downgraded Britain's debt and several economists have lowered their growth forecasts. On Wednesday, RBC cut its forecast for economic growth in 2016 to 1.4 per cent from 1.8 per cent, citing uncertainty over Brexit. The bank sees no growth next year at all. It had expected 1.8 per cent growth in 2017.

With a report from Reuters