Les Francais disent NON - Euro dives

Monday, May 30, 2005

54.9 percent of French voters have rejected the EU constitution, dealing a huge blow to the process of European integration. Voter participation percent of more than 70 percent was exceptionally high, French authorities reported. EU president Jean-Claude Juncker was "perplexed" about the result, he said in a first statement and added it would be impossible to renegotiate the constitution. He nevertheless wants to proceed with the ratification in the other EU member states. French politicians called it a defeat for Europe and a defeat for France. French president Jaques Chirac announced a "strong impulse" after the rejection, which will likely propel the head of the conservative party, former interior minister Nicolas Sarkozy to the post of prime minister, replacing unpopular Jean-Pierre Raffarin.

The Euro plunged almost a cent to a seven-month low of 1.2507 dollars in Asian trading and recovered a little in quiet European trading. Gold and silver were up.
There is risk of a further weakening as Europe now faces not only economic but mounting political problems as well. The Netherlands will vote on the referendum on Wednesday. Dutch premier Jan Peter Balkenende urged voters not to follow the French decision. A poll from Saturday sees even bigger discontent - 57 percent of the Dutch are opposed to the treaty.
The EU faces an unprecedented crisis anyway as the French result shows a deep rift about the future course of the Union. A first analysis shows that salaried workers and rural voters ticked overwhelmingly "no" on the ballot papers.
High umemployment in France and Germany and sluggish growth in most member states could bring a further political shift to the left as Europeans tend to see no positive impact from the pro-market policies that have been pushed by EU lawmakers.
The EU heads of state will discuss the future course of the Union at a summit on June 16 and 17 in Brussels. British Foreign Secretary Jack Straw said the rejection raised profound questions about the future of the EU, which once started as an economic union that has transformed into a political union as well. The constitution would have established a common European minister of foreign affairs.
The lack of a constitution also blocks a reform of the EU bodies as any step would have to be ratified by all 25 member states. Only nine countries have ratified the constitution so far: Austria, Germany, Greece, Hungary, Italy, Lithuania, Slovakia, Slovenia and Spain.
BBC news has an overview where member states stand in the debate.
European share markets all trended moderately lower in early European trading, France leading the list of losers with a fall of 0.74 percent in the CAC 40. Only German shares were quoted largely unchanged with the DAX index showing a gain of 0.06 percent. The London Stock Exchange was closed on Monday because of bank holiday.
UPDATE: Brad Setser's Web Log has a post on the French "Non", most interesting are the comments there.
A Fistful of Euros dives ever deeper in today's no. 1 topic.


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