New Constitution of Europe: Europe standing at crossroad of its history

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With all of the votes counted by France’s interior ministry put the “No Vote” at 54.87%. Overall turnout was forecast to be around 70%. Dutch voters said "nee" by 61.6% to 38.4%. It was the Netherlands’ first ever referendum. Both the turnout and the margin of victory were much higher than opinion polls had predicted. Ten of the 25 EU member states are holding a referendum on the constitution. Of these, only Spain has voted, in February, and only 42% of the electorate; but the "yes" got 77%. All 25 members must endorse the constitution. A "non" in France and a "no" in the Netherlands kills the spirits of one Europe and one currency.

Already Ratified the European Union Constitution

Austria
Germany
Greece
Hungary
– Italy
Latvia
Lithuania
Slovakia
Slovenia
Spain

The recently held referendums of French and Dutch have dashed hopes of political union in Europe. As criticism of the euro grows louder, there are fears that European Monetary Union [EMU], too, might be in peril. Although the French President Jacques Chirac is trying his levels best to limit the damage from his people’s rejection of the European Union constitution yet the occurred damage is great. Mr. Chirac spoke to several EU partners to reassure them that France, for decades one of the Union’s main pillars, wanted to press on with deeper European integration despite the crushing defeat in recent referendum. The verdict of “No” of France and “Nee” of Dutch is a major political shock for France and for the European Union. It has multidimensional effects. The new constitution has close to a zero chance of survival. The referendum is binding in France, and although legally possible, a second vote is unlikely in the short term, not before a new President is elected. In a surprising way, Britain suspended legislation to set up a referendum on the new European Union constitution, putting it at odds with Germany and France who have called for the ratification process to continue. The Czech Republic has also suspended its referendum.

Referendum Timetable (2005)

Spain: February 20, 2005
France: May 29, 2005
The Netherlands: June 01, 2005
Luxembourg: July 10, 2005
– Denmark: September 27, 2005
Ireland: Late 2005
Portugal: Late 2005
UK: April to June 2006
Czech Republic: June 2006
Poland: No date set

The people of France strongly rejected the referendum so partly as a protest against the government, especially over the economy. On the left, many voters believed that the new constitution of EU would create an ultra-free market economy within the EU. On the right, voters were concerned that France is yielding too much sovereignty to the EU. The common of Netherlands were also concerned about the place of its country in an enlarged EU, fearing the effects on a smaller member state with liberal traditions. The EU also has to face the problem of the mismatch between the views of the people and the views of the politicians. The Dutch Socialist Party was already geared up to celebrate a victory for the "No" camp before the exit poll flashed up on the television screen.

The Union’s leaders urged other countries to continue ratifying the constitution which is designed to ensure the enlarged bloc runs smoothly and to prevent decision-making being paralyzed. It is seemed that further enlargement of EU for the time being is over. It is vote against “Social dumping” by low-cost new members and sentiments are very strong in Germany and even Italy. It also revels that the door of integration will not be closed to candidates from the former USSR and Turkey but right now it is very difficult to maintain the pace of enlargement process. Simply, negotiations will be much tougher and the delays longer. Romania and Bulgaria, which were approved at the eleventh hour, will nevertheless probably make it. The size of the “no” vote in France and the Netherlands may strengthen anti-reform forces in neighbouring countries such as Germany and Italy. Italy entered its second recession in two years in the first quarter of 2005. Germany, despite tentative stabs at structural reform, is struggling with glacial growth rates and double-digit unemployment. And Portugal, also battling recession, just announced that its budget deficit will top 6.8% of GDP this year, more than twice the 3% limit set by the stability and growth pact agreed in Maastricht. First prey of European Constitution is the Prime Minister of France Raffarin and President Chirac has appointed Nicolas Sarkozy the next PM of the country.

France will soon implement a more social economic policy. This would probably mean no civil servant headcount cuts in the 2006 budget, more social spending and thus a larger budget deficit in 2006 probably above 3% of GDP, and possibly delays in privatization programs. In addition, France is likely to favour protectionist policies European preference, obstacles to outsourcing in EU institutions. In the next elections, the head of the state may also be changed and Laurent Fabius(left camp) and Nicolas Sarkozy(right camp) likely contenders for the presidential race.

Nine countries representing nearly half the EU’s 454 million citizens have already approved the constitution. Increased political uncertainty and more talk of a possible break-up of the euro area will probably undermine the euro, not only against the USD but also against other currencies sterling, Swiss franc, and yen. The euro slid to its lowest level against the dollar in over seven months after French voters rejected the European Union constitution, throwing doubts over the political future of the bloc. The euro fell 0.8 per cent to $1.2471, it was lowest since October 2004 after hitting automatic sell orders on the break of chart support at $1.2590. The euro was down 0.85 per cent against the yen, at 134.65, and was under performing both the Swiss franc and British pound.

A further depreciation of the euro and the prospect of more expansionary fiscal policies might accelerate the European Central Bank’s calendar. The impact on long-term interest rates is less certain. Financial markets might also anticipate slower long-term growth. A higher probability of an EMU break-up and the possibility of fiscal policies turning more aggressive will likely penalize government bonds of highly indebted countries, starting with Italy. Convergence trades related to EU and EMU candidates within the EU may suffer further from the EU political backlash. A weaker euro, especially against Asian currencies, could give some colour to price-sensitive sectors and companies.

Turkey’s government and financial markets badly affected with the France and Dutch’s rejection of the new European Union constitution. It is now predicted that it would damage Ankara’s bid to join the EU. Turkish financial markets were jittery for weeks ahead of the referendum. Greece’s military is keeping a close eye on traditional rival Turkey after French and Dutch referendums on the EU constitution raised questions on future EU enlargement. Croatia, Macedonia, Bulgaria, Romania, Moldova, Kosovo, Albania, Bosnia-Herzegovina, and Serbia-Montenegro, face uncertainty in varying degrees as regards their prospects of gaining entry into the EU. The broken parts of former Yugoslavia may begin to drift if they are deprived of the dream of a possible EU membership. In every Balkan capital, leaders were at pains to reassure their people the French and Dutch rejection of the EU treaty did not mean the door had slammed shut.

France’s voters decisively rejected the new European constitution, plunging the country into political upheaval and the EU into the deepest crisis in its 50-year history. The outcome also prompted immediate speculation in London that Britain’s planned referendum on the treaty was now pointless. The consequences of “No” in recently held referendum in France and Netherlands may harm the short and long terms status of France’s driving seat. The mechanism of economics and politics may also be in great danger. Deregulation process, free-market concept, dreamed liberalism, and Thatcherism would be halted. It is also set back to proverbial Polish plumber and Turkish taxi driver. The fear of massive immigration from newly entered poor countries of Western Europe, and loss of hundred of thousands people’s job were the core issue and played a very important role in the recently held referendums.

Chancellor Gerhard Schroder in Germany, who faces elections in a few months; Chirac, with two years of his term left; and Prime Minister Silvio Berlusconi in Italy are all deeply unpopular. Prime Minister Tony Blair in the UK, who only a few weeks ago seemed gravely weakened by the relatively poor showing of his Labour Party in the general election and was facing calls to step down as soon as possible, now looks the strongest of the lot. Blair, however, for the moment appears more concerned with saving Africa from poverty than saving Europe from itself.

For at least 50 years, the Britain has had two main goals in united Europe. The first was to blunt the drive towards European political union; the second, to prevent Franco-German domination of European politics. The people of France and Netherlands have benefited the hidden desires of UK. The establishment of USA is also happy to see the results of referendums. It is seemed that visits of secretary of state foreign affairs US Secretary of State Condoleezza Rice and Mr. Bush the President of United States of America to Europe is now paying the dividends.

Conclusion

The message from France and the Netherlands is that common people are unhappy with the way Europe is being built. People are unhappy with the fact that Europe is a project of the elite, not the ordinary people. France and the Netherlands in 2005 clearly have some things in common, including a poorly performing economy and a deeply unpopular government in the Dutch case, the most unpopular government on record. The new constitution cannot come into effect unless all 25 EU members as is made clear in Article IV-447 ratify it. EU leaders will be meeting in Brussels on 16-17 June 2005. The ongoing bilateral nuclear negotiations between the major countries of EU and Iran has been delayed for next two months due to emerging new geo-political and geo-strategic scenarios within the EU. The textile and arms embargo issues between EU and China may be endangered. Whether it is the EU view on the Taiwan Strait, or dealing with North Korea every thing is at stake. The impact on the geopolitics of the EU’s region remains to be seen. Unresolved issues of ethnicity, blood feuds, pogroms, religious extremism and sub-nationalism would be emerging issues in EU.

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