European integration at crossroad

Already beset by economic doldrums, the European Union's ambitious dream of forging 25 nations into a united global powerhouse on the scale of the US or China has come to a grinding halt - at least for now.

By rejecting the proposed European Constitution in Sunday's referendum, France has set back plans for deeper European integration by at least a year, perhaps longer. And it's giving leaders from Poland to Portugal pause to consider what their people want from this union.

"Underneath all of this there is a more profound question, which is about the future of Europe and, in particular, the European economy," British Prime Minister Tony Blair said.

The euro fell Monday to below $1.25 against the US dollar, a seven-month low.

Mr. Blair's call for "time for reflection" on that question fulfilled the fears of former French Finance Minister Dominique Strauss Kahn, who backed the Constitution. "This is clearly a stamp on the brakes," he said Sunday night as opponents of the charter won by a 55 percent to 45 percent margin. "Europe is entering a period of hibernation, and I don't know how long it will last."

The French vote has not killed the European Union, which constitutes the world's largest economy and the most ambitious experiment in transnational governance.

It has not even necessarily killed the EU's 300-page Constitution which took three years to negotiate. EU leaders are calling for the continent-wide process of country-by-country ratification to continue as planned.

"We cannot say that the treaty is dead," insisted Jose Manuel Barroso, President of the European Commission, although he acknowledged that the French referendum result was a "serious problem" for a constitution that must be ratified by all EU members in order to come into force.

Some officials, such as Valery Giscard d'Estaing, the former French president who chaired the convention that drafted the Constitution, suggests that France could vote again in a year's time.

Analysts note that Chirac made a tactical mistake by choosing to ratify the Constitution by popular vote instead of a parliamentary vote. The parliaments of eight nations have ratified the vote without a hitch. Chirac isn't expected to bow to calls for his resignation but is likely to name a new cabinet.

Still, the psychological shock of France - one of the prime movers behind the European project for the last 50 years - balking Sunday at a Constitution designed to consolidate and extend the EU's achievements will be felt well beyond French borders.

"It could be a historical watershed, a turning point," predicts Dominique Moisi, one of France's most pre-eminent commentators on international affairs.

That, he says, is because few French citizens voted on the merits of the highly technical and laboriously written legal document presented for their approval. Instead, most of them were expressing their anger at their government's failure to create jobs, and their fear that the European Union can no longer shelter them from the harsh winds of globalized competition.

Few European leaders have the credibility or the courage to "help people transcend their fear, understand that the European Union is their destiny, and follow" as they push through the kind of painful economic reforms Europe needs to make itself competitive, Mr. Moisi worries.

Instead, beset by high unemployment and stagnant economies, leaders of Germany, France and Italy - all face election campaigns in the near future - are likely to see the French "non" as a signal to back-off from economic reforms.

Moisi warns that would be the wrong lesson. "As the train of history accelerates, we cannot afford to stay in the station," he says.

If the train of history is heading for a less socially conscious and more unbridled capitalist future, however, many of Europe's citizens say they should have been told the destination before being given tickets.

Indeed, the sense that elite politicians, businessmen, and journalists have built modern Europe without bothering to consult its people fueled much of the resentment against the Constitution, exit polls suggest.

"The 'no' vote was democratic revenge against the process of European construction," said Arnaud Montebourg, a French Socialist member of parliament who defied his party's leadership to campaign against the Constitution. "French voters burst in on that process."

If the results of that intrusion are mirrored elsewhere - and opinion polls suggest that Dutch voters will turn against the Constitution at their referendum on Wednesday - it will be hard to resuscitate the charter, most analysts say.

"People will have to go away and think again," says Denis MacShane, Britain's Europe Minister until earlier this year. "Europe will have to carry on under existing treaties, but there will be a period of stasis in European affairs that won't be cleared up until the political question of leadership in Germany, France and Italy is cleared up at elections."

That stasis, and the period of introspection that would follow the death of the Constitution, would clearly undermine French-led efforts to build the EU into a confident global counterweight to the United States.

Less welcome to Washington, however, would be other effects, such as the brake that EU leaders might well put on membership negotiations with Turkey - an important US ally.

Those negotiations are due to start next October, despite widespread misgivings among ordinary Europeans, especially in France, about the wisdom of admitting a large, poor Muslim country into their club.

With European voters clamoring to be heard, and Turkish accession unpopular, "one concrete thing the EU could do to respond to popular discontent is to kick Turkey as a scapegoat" by postponing accession talks, says Mark Leonard, a senior analyst at the Centre for European Reform, a think tank in London.

At the same time, US policymakers seeking European assistance in dealing with issues from Iraq to international terrorism would not enjoy the convenience of one of the Constitution's provisions - a permanent foreign minister to streamline a more coherent European policy on international affairs.

Such concerns were hardly at the forefront of most French voters' minds, however. Rather, one exit poll found, fear of joblessness was the top criterion for 46 percent of them. "The French want a Europe that is more protective, closer to them and better at listening to their daily worries," the head of the ruling Union for a Popular Majority, Nicolas Sarkozy, told party faithful after the referendum.

Underlining the way in which the European Union has lost touch with its less fortunate citizens, opinion polls found that the Constitution was less popular with the poor than with the well off, and better received in urban areas than in the countryside. "The politicians have got ahead of people's capacity for change," says Daniel Gros, director of the Centre for European Policy Studies in Brussels.

French voters "have shown that there is too big a gap now between the ruling classes in Europe and the citizens of Europe," added Liam Fox, foreign affairs spokesman for the Conservative party in Britain.

The challenge now facing Europe's rulers, warns Mr. Leonard, as they seek to strengthen the continent's economies without alienating too many voters, "is how you show that you are listening but at the same time ensure that you don't cripple the EU."

Eventually, he says, after a period marked more by thought than by action, Europe will find a new way of breaking down further the political and economic barriers between its members. "The EU has stalled before," he points out, "but it has never gone backwards."

• Mark Rice-Oxley in London contributed to this story.

All 25 EU member states must individually ratify Europe's first Constitution - either by national referendum or parliamentary vote - for it to take effect.

France Voted "non" on Sunday, but Nine EU member states have already ratified the treaty:

1. Austria Parliamentary vote

2. Germany Parliamentary vote

3. Greece Parliamentary vote

4. Hungary Parliamentary vote

5. Italy Parliamentary vote

6. Lithuania Parliamentary vote

7. Slovakia Parliamentary vote

8. Slovenia Parliamentary vote

9. Spain Referendum

Partially ratified

1. Belgium Parliamentary vote

Upcoming Votes:

1. Netherlands: June Referendum

2. Luxembourg: July 10 Referendum

3. Malta: mid July Parliamentary Vote

4. Denmark: Sept. 1 Referendum

5. Ireland: Late 2005 Referendum

6. Portugal: Late 2005 Referendum

7. UK: Spring 2006 Referendum

8. Czech Republic: Summer 2006

Referendum

DATe not yet set: Poland, Latvia, Estonia,Finland, Sweden, Cyprus

Source: AP