Under the radical proposals EU countries will lose the right to have their own army, criminal law, taxation system or central bank, with all those powers being transferred to Brussels. Controversially member states would also lose what few controls they have left over their own borders, including the procedure for admitting and relocating refugees.

The plot has sparked fury and panic in Poland - a traditional ally of Britain in the fight against federalism - after being leaked to Polish news channel TVP Info. The public broadcaster reports that the bombshell proposal will be presented to a meeting of the Visegrad group of countries - made up of Poland, the Czech Republic, Hungary and Slovakia - by German Foreign Minister Frank-Walter Steinmeier later today.

Excerpts of the nine-page report were published today as the leaders of Germany, France and Italy met in Berlin for Brexit crisis talks. In the preamble to the text the two ministers write: "Our countries share a common destiny and a common set of values that give rise to an even closer union between our citizens. We will therefore strive for a political union in Europe and invite the next Europeans to participate in this venture."

The revelations come just days after Britain shook the Brussels establishment by voting to leave the European Union in a move some have predicted could lead to the break-up of the EU. A number of member states are deeply unhappy about the creeping federalism of the European project with anti-EU sentiments running high in eastern Europe, Scandinavia and France.

It is important to understand that the Brexit vote was not the beginning of a new crisis – it has simply accelerated a global financial crisis that started last year and that was already in the process of unfolding. As I noted on Friday, we have been waiting for “the next Lehman Brothers moment” that would really unleash fear and panic globally, and now we have it.

The next six months should be absolutely fascinating to watch. We were already dealing with a new global economic crisis without the Brexit vote. But what this does is it introduces an element of panic and fear that had been missing up until this current time. And markets do not like panic and fear very much. In general, markets tend to go up when things are calm and predictable, and they tend to go down when chaos reigns.

Unfortunately, I believe that we are going to see quite a bit more chaos for the rest of 2016, and the trillions that were lost on Friday may turn out to be just the tip of the iceberg.

Summing up yesterday's events, Suzanne Evans, a prominent Vote Leave campaigner and Ukip spokesperson, wrote on her Facebook: 'If this was the predicted apocalypse, well, it was a very British one. It was all over by teatime. Not a bad first day of freedom.'

The about-turn in the markets was sparked by the Bank of England pledging to do whatever it takes to prevent a full-blown financial crisis. In the hours after the Brexit vote, the pound plunged to a 31-year low, and the FTSE 100 index sank 550 points or 8.7 per cent in a matter of minutes yesterday morning.

But the stock market clawed back more than half its losses as the day wore on, before closing down 3.2 per cent or 199.41 points at 6138.69. The blue-chip index of leading British companies finished the week 2 per cent higher than it started, despite warnings of catastrophe following Brexit.

Angela Merkel's country faces having to pay an extra £2.44 billion a year to the annual EU budget once Britain has left. Fears for the future of the EU have prompted German government officials to propose that Britain is offered “constructive exit negotiations”. The aim is of making the UK an “associated partner country” of the EU, according to German newspaper Die Welt today.

Hungarian Prime Minister, Viktor Orban, warned that Europe needs to change its ways. “Brussels must hear the voice of the people, this is the biggest lesson from this decision," he told public radio. “But Europe is strong only if it can give answers to major issues such as immigration that would strengthen Europe itself and not weaken it. The EU failed to give these answers."

Another critic of the EU, the leader of Poland's ruling party, said that the UK referendum result shows the need for reform of the EU. “The conclusion is obvious. We need a new European treaty," said Jaroslaw Kaczynski, who heads the Law and Justice party. “We need a positive reaction, and not persistent movement in the same direction, a direction which has led to crisis," he added.

Tensions are rising across the EU, with Denmark, France, Italy, the Netherlands, and Sweden all facing demands for referendums over Europe. In a statement, German Chancellor Angela Merkel said: "There is no point beating about the bush: today is a watershed for Europe, it is a watershed for the European unification process."

There are times, not very often, when you can feel history being made. An archduke falls, a wall comes down, a plane hits a building, and in that moment you can feel the ground shifting beneath your feet. When those initial results came in from Sunderland and Newcastle in the early hours of yesterday morning, I could barely believe it. Even now, to write the words 'Britain has voted to leave the EU' feels extraordinary, like a leap into some alternative reality.

For once, all the cliches are justified. This was not merely an electoral earthquake. It was a popular revolt by vast swathes of England and Wales against the political, financial and cultural elite, whose complacent assumptions have been simply blown away. Indeed, for once it really is impossible to exaggerate the significance of the moment. What happened was undoubtedly the most dramatic, the most shocking and even the most revolutionary event in our modern history. We will live with the consequences for the rest of our lives.

Every rule of politics has been broken. Barely a year after winning a stunning majority, the Prime Minister has gone, a broken man. The Tory Party, plunged into a three-month leadership battle, has been divided almost beyond repair, while Labour's leaders have been exposed as almost comically unpopular and out of touch.

MPs who campaigned for Remain were warned to respect the will of the people last night amid fears they could try to frustrate the Brexit result. Some on the In side have called for sympathetic members on all benches – Tory, Labour, Lib Dem and SNP – to use their overwhelming majority in the Commons to keep Britain in the single market.

They want to sign the UK up to a Norway-style relationship with the EU that would bring full access to the single market on the same terms as now, but would result in Britain having to accept continued freedom of movement. Former Tory MP Matthew Parris today said the single market had not been on the ballot paper, stoking concern among Brexiteers the Commons could refuse to pass the necessary laws.

Out campaigners have warned that such a move would spark a constitutional crisis because it would counter the spirit of a pro-Brexit referendum result and ignore public concerns over EU immigration. Some legal experts point out that the referendum is not legally binding – meaning MPs could in theory ignore it, no matter how politically difficult. The closeness of the result – 52 per cent in favour of Leave – could also give some MPs the excuse to call for not complying with the result.

The Commons is overwhelmingly pro-EU, with just over 70 per cent of members having campaigned for Remain. A slight majority of Tory MPs were pro-Remain, along with almost all Labour, SNP and Lib Dem MPs.

On the same day President Barack Obama announced his controversial transgender school bathroom policy last month, a somewhat more sinister mandate was finalized by the Department of Health and Human Services (HHS) with consequences for health care providers, insurance companies, and American taxpayers.

The rule contains an explicit definition of gender identity that states a person can claim to be male, female, neither, both, or some combination of the two, said Roger Severino, director of the DeVos Center for Religion and Civil Society at the Heritage Foundation. “It’s now federal policy that you could be both male and female in some combination,” he said. “That’s a pretty radical statement, and impossible to know what it really means.”

If a medical doctor, based on biological evidence, sees a male patient, but the patient claims to be a female, the doctor must treat the patient as a female. Failure to do so could leave the doctor vulnerable to lawsuits, lost federal funding, and federal investigation by the Office of Civil Rights, the HHS arm implementing this policy.

As Europe's most powerful leader and the head of Europe's largest economy, Merkel must now lead negotiations on new terms for the UK's relations with the EU, including the access of British companies to the biggest single market in the world. Speaking to journalists in Berlin, the German chancellor said the EU was strong enough to find the "right answers," adding that the aim of future talks should be to ensure bilateral relations with Britain are "close and based on cooperation."

While other EU chiefs have said the UK must begin the exit process as soon as possible, Merkel made no such appeal. She said she would keep the interests of German citizens and German businesses in mind during any talks. Merkel and other European leaders must now determine how hard a line they want to take during upcoming Brexit negotiations. On the one hand, too harsh a response would also be a detriment to Britain's European trading partners, while being too soft could embolden other Euroskeptics to call for their own national referenda.

Martin Schulz, the president of the European Parliament and a German social democrat, said he would deliberate with Merkel on "how we can avoid a chain reaction" in which other EU states followed Britain's lead out of the bloc. "That'll have consequences and I don't believe other countries will be encouraged to follow that dangerous path," Schulz said.

It's also a lashing out against "the powers that be" in both London and Brussels. The British have followed a patriotic whim. All the flags, the drumming, the pledges and promises of the Brexiteers worked in the end - and that's what makes this day so frightening.

The negative ramifications of a Brexit vote were predictable - and were widely discussed prior to Thursday. But none of the warnings prevented the British from voting to leave. It is no less than an act of deliberate self-mutilation. Britain has now become a little more foreign to us. The British voted against pragmatism and for risk. That's part of what makes this morning so surreal.

The Europe that woke up this morning is a weaker one. It will take years before Britain's exit from the EU is finally completed. Until that time, the Continent faces a period of uncertainty and tumult, as does Britain. Brexit is a democratic decision that cannot be changed. Now Europe needs to learn a lesson from it - it has no other choice.

Mrs Merkel said we are "living in a world of turmoil" as she urged Europe to remain “calm and composed” in the wake of the historic Brexit result. She said: We have to remain calm and composed. We need to make composed analysis and decisions. “We need to make sure that Europe is varied, and as varied as the people of the EU are.”

“Time and time again we are confronted with people that have doubts over the direction that the EU has taken. We have to make sure that people feel that the EU can make a contribution to people’s lives.” Mrs Merkel described the EU as a “unique community of solidarity and values". The German leader confirmed she will meet with the European Council president Donald Tusk, French president Francois Hollande and Italy’s prime minister Matteo Renzi in Berlin on Monday.