Scary Stuff in Europe

French "No" stings leaders of France, Europe

PARIS (Reuters) - France and Europe licked their wounds on Monday after French voters dealt what politicians across the continent said may have been a knockout blow to the European Union constitution.

Defeated in one of the biggest referendum turnouts for years, President Jacques Chirac hinted he could replace Prime Minister Jean-Pierre Raffarin, who told reporters after meeting Chirac to expect unspecified political developments by Tuesday.

Many voters -- and turnout was 69.7 percent -- used the vote to punish the government over France's economy and high unemployment. Chirac, 72, ignored calls from some members of the "No" camp that he step down.

EU leaders insisted the treaty -- intended to make EU decision-making easier -- was alive and member states should go on ratifying. But few doubted the result would hamper its chances elsewhere in the 25-nation bloc, notably in Wednesday's vote in the Netherlands.

The constitution requires the backing of all member states to go into force.

"There is a risk of contagion," European Commission President Jose Manuel Durao Barroso told French LCI Television after results of Sunday's vote showed a resounding 54.87 percent of French voters voted "No".

SERIOUS PROBLEM

"It's a very serious problem. We can't talk about business as usual," he said, adding EU leaders would discuss the crisis in confidence at a June 16 summit in Brussels.

The bigger-than-expected victory for the "No" camp drove the euro down a third of a percent to $1.2528 (86 pence) in early trading. The charter, intended to ensure the smooth working of the enlarged bloc, requires the approval of all member states and investors now fear a bout of political uncertainty.

Luxembourg Prime Minister and current EU presidency-holder Jean-Claude Juncker said the result could harm the July referendum in his tiny, pro-Europe state and warned of consequences for the European economy.

"It cannot be positive for the economy of Europe," Juncker said on French RTL radio.

Juncker said the result could hit the standing of EU founder member France in the bloc, a concern echoed in much of the French press. "A masochist masterpiece" was the way the Paris daily Liberation described the vote against the treaty.

"The French know from experience that their country is doing badly. Unfortunately, it is doing even worse this morning."
The heavy defeat leaves Chirac something of a lame duck two years before presidential and parliamentary elections and was seen reducing the chances of a repeat vote on the treaty.

The Netherlands holds its own referendum on the EU constitution on Wednesday and Dutch ministers urged voters on Sunday to ignore the result in France. A Dutch "No" vote, as opinion polls forecast, would sting the EU even more.

Juncker said nearly half the 454 million EU citizens in nine states had already backed the charter and added: "The European process does not come to a halt today."

CHIRAC PROMISES CHANGES

As a large crowd of flag-waving treaty opponents celebrated victory on Sunday night in Place de la Bastille in Paris, a major landmark of the 1789 French Revolution, Chirac dropped his heaviest hint so far that he planned to remove Raffarin.

"I intend to respond ... by giving a new and strong impetus to the action of the government," Chirac said in a televised address soon after the result was announced.

Many voters resent what they see as France's declining role in the Union, especially with the expansion to 25 members last year, and say the treaty enshrines economic policies that have failed to stop the loss of jobs to low-wage economies.

British Prime Minister Tony Blair said the EU needed time for reflection. He said there was no decision as yet on whether Britain would hold a referendum as planned next year.

"The referendum result is a blow for the constitutional process, but not the end of it," German Chancellor Gerhard Schroeder said. "It is also not the end of the German-French partnership in and for Europe."

Nine countries have approved the treaty, including Germany which alongside France drove creation of the post-World War Two economic alliance that developed into the European Union.