While France's rejection of the proposed EU constitution was a stinging rebuke to its own leaders, it could have painful consequences for economic integration in Europe and for the most tangible symbol of that unity: the euro.
By throwing Europe's political future into disarray, analysts said the vote could undermine the currency's stability -- not this week or next, but down the road, as it seeks to expand to more countries.
The euro wobbled in trading on Monday, hitting a seven-month low against the US dollar. It has fallen steadily against the greenback in recent weeks, with traders expecting a negative vote in France, and steeling themselves for rejection in the Netherlands yesterday.
Few experts are predicting a full-blown crisis for the euro, which is safeguarded by the politically independent European Central Bank. France's refusal to ratify the constitution will have little impact on the day-to-day running of the monetary union, or on the maze of regulations that govern the world's largest trading bloc.
Still, as Paul De Grauwe, a Belgian expert on the currency, put it, "Something psychological has changed."
Like many economists, he believes that the long-term viability of the euro hinges on the gradual political integration of the countries that use it -- a prospect that, for now at least, is dashed.
"Can the euro survive without a political union?" De Grauwe said. "I have my doubts."
The French rejection also has troubling implications for Europe's economic future. The vote, analysts said, was essentially a protest against French President Jacques Chirac and his government for not doing enough to protect the French people from the crosscurrents of the global economy.
With politicians in Germany and Italy under attack for similar reasons, they said, there is a risk that the continent's largest economies could veer off into protectionism and state intervention, which could deepen their budget deficits and hinder their efforts to revive stagnating output.
"There is a real fear of the world outside Europe, of globalization," said Aurore Wanlin, a fellow at the Center for European Reform in London. "And there is a strong rejection in France and Germany of the need for economic reform. People just don't get it."
Spooked by a sullen, rebellious electorate, European leaders might give up trying to force sweeping changes of their social-welfare systems. Publicly, at least, they are likely to talk down US-British-style economic policy, with its emphasis on competition and untrammeled markets.
"There has been a parallel debate in Germany and France about neo-liberalism versus the social market economy," said Allan Saunderson, chairman of EuroZone Advisers, a consulting firm in Frankfurt.
"That debate is going to become a lot sharper over the next few months," he said.
At its heart, he said, the question is whether these countries can still afford to prop up costly welfare states in a global economy. In Germany, the debate has mutated into an occasionally vitriolic attack by the governing Social Democratic Party on big companies and foreign investors.
As politicians try to win back the affection of voters, some economists fear they will cater to narrow domestic interests rather than broader European principles, like those enshrined in the constitution.
That trend is already visible in the European Commission's inability to enforce fiscal discipline among the 12 countries that use the euro. Analysts say the French vote will further vitiate the Stability and Growth Pact, the agreement that limits deficits within the euro zone.
"I could very well see the next French prime minister saying the Stability Pact is a European law, and European laws no longer have legitimacy with the French people," said Daniel Gros, the director of the Center for European Policy Studies, a research group in Brussels.
France, Germany, Italy and Portugal are all in violation of the deficit limits. In Portugal, the deficit may reach 6.8 percent of GDP this year -- more than twice the level allowed by Brussels.
Italy, with its mushrooming public debt, recession and declining competitiveness, is of particular concern. Gros said that if the Italian government did not arrest the slide, it could lose a decade's worth of work preparing to adopt the euro.
Among other casualties of France's rejection may be further expansion of the EU, a process economists often advocate as a way to spur Europe's growth and competitiveness.
Some Western European leaders are likely to resist the entry of Turkey into the union because it would stir voters' fears of an influx of low-cost foreign workers. Fears of such cheap labor fueled the anti-Europe camp in France.
In Germany, as in France, voters in a state election on May 22 in North Rhine-Westphalia sent a message to German Chancellor Gerhard Schroeder that his reform policies were not working. Germany's jobless rate is a record in the post-World War II period.
Schroeder responded to his party's trouncing by moving up Germany's federal elections by a year, to September.
Angela Merkel, the conservative leader who was confirmed on Monday as the opposition's candidate for chancellor, took pains to play down her reputation as a radical reformer. Merkel said her policies would be focused on finding "ways of creating work for people in Germany." And she reiterated her opposition to Turkey's full membership in the EU.
"This alienation between Europe and its public must be overcome, and therefore in my opinion, we need an honest debate about Turkish membership," Merkel told supporters in Berlin.
Some economists argue that Germany has progressed further in its reform process than either France or Italy. By keeping a lid on wage increases, German companies have managed to regain their competitiveness. German exports continue to thrive, even as the domestic economy falters.
"Germany is about to diverge," Gros said. "If they elect a new government, they can say, `we're the solid anchor of Europe.'"
Some argue that Europe's anchor is no longer any one country, but its single currency. Saunderson described the euro as a "port in the political storm," adding that the European Central Bank has so far been immune from pressures to lower interest rates to prop up faltering economies.
The euro's recent decline versus the dollar, he added, was not a bad thing since it would help European exporters regain their edge in foreign markets. European markets, led by shares of exporters like Porsche of Germany and Royal Phillips Electronics of the Netherlands, rose on Monday.
Still, currency analysts took a more jaundiced view, saying the euro's fall could quicken if the Netherlands followed France in its rejection of the constitution. Carsten Fritsch, an analyst at Commerzbank, said the upheaval could even unnerve some foreign central banks.
"The French `no' vote suggests that the euro zone is no longer such a homogeneous area," Fritsch said. "This could lead central banks to rethink their policy, and slow down the accumulation of euros."
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry