France no vote shakes Europe

France and Europe reeled from resounding no vote on the European constitution by French voters.

May 30, 2005: 8:25 AM EDT

PARIS (Reuters) - France and Europe reeled from the resounding "No" of the French people to a proposed constitution for the European Union on Monday after a vote which many politicians said could be a knockout blow to the charter.

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.

In a turnout of 69.7 percent, many voters used the vote to punish Chirac and his government over France's economy and high unemployment. The 72-year-old leader promised to make changes but ignored calls from some in the "No" camp to step down.

The charter, designed to ensure smooth decision-making in the enlarged bloc, requires the backing of all member states to enter into force. EU leaders insisted the treaty was alive but acknowledged the French result hit its chances elsewhere in the 25-nation bloc, notably in Wednesday's vote in the Netherlands.

"There is a risk of contagion," European Commission President Jose Manuel Durao Barroso told French LCI Television after results of Sunday's referendum showed 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.

British Prime Minister Tony Blair told reporters on a visit to Italy the EU needed "time for reflection," adding it was too early to say whether Britain would proceed with its referendum due early next year.

The bigger-than-expected victory for the "No" camp drove the euro down by over a third of a percent to $1.2524 in European trade. But with markets closed for a holiday in London and the United States, the full effect could be delayed till Tuesday.

While the outcome was not seen jeopardising the monetary union that underpins the euro, leaders feared investors could be put off by a protracted bout of political uncertainty and could damage attempts to reform the euro bloc's economy.

It cannot be positive for the economy of Europe," Jean-Claude Juncker, prime minister of current EU presidency-holder Luxembourg told French RTL radio.

The outcome resonated as far as EU-hopeful Turkey, where the government said the vote was a purely French matter. The Turkish lira held steady, but lawmakers and analysts said it could harm entry talks due to start on Oct. 3.

"The French result shows that European public opinion is not ready to welcome Turkey as a partner," said Emin Sirin, an independent member of the Turkish parliament.

The heavy defeat leaves Chirac something of a lame duck two years before presidential and parliamentary elections and speculation grew that he would announce a cabinet shake-up after he promised to inject "new impetus" into his government.

Raffarin, whose job is seen on the line over the defeat of the pro-constitution camp, left a half-an-hour meeting with Chirac on Monday morning promising early moves.

"There will be developments later in the day...or tomorrow," he told reporters as he returned to his office, declining to say whether he had tendered his resignation.

Sarzoky seen as favorite
Analysts said the sheer size of the "No" vote could make Nicolas Sarkozy, ambitious leader of Chirac's ruling UMP party, favorite for the post after he called for a radical economic and social overhaul after the result on Sunday.

The other main contender is Interior Minister and long-time Chirac loyalist Dominique de Villepin, a main Sarkozy rival.

Analysts picked over the reasons for the resounding defeat of the "Yes" camp on Monday, with wide agreement that a key factor was anger at unemployment -- now at a 5-year high of 10.2 percent -- and at Chirac's unpopular economic reforms.

Some said the "No" camp had captured public concern about France's declining role in an EU of 25 countries to argue the constitution would mean a loss of sovereignty and a shift of more powers to Brussels.

Many voters used the vote to signal unease at the prospect of poor, mainly Muslim Turkey joining the EU while others simply despaired at the complexity of the charter of over 400 pages.

The Netherlands holds its referendum on the 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.

Nine countries representing nearly half the blocs 454 million citizens have approved the treaty, including Germany which alongside France drove creation of the post-World War II economic alliance that developed into the European Union.