Wednesday, June 01, 2005

Europe In Crisis
After Dutch and French Reject Treaty

From Reuters:

The European Union was in disarray on Thursday after the Netherlands followed France in resoundingly rejecting the bloc's new constitution, possibly stalling future expansion and disrupting decision making.

The rejection of the charter by two of the six countries that founded the bloc in the 1950s could deal a fatal blow to a treaty designed to make the EU run more smoothly following its enlargement from 15 to 25 states last year. The votes also cast doubt on the EU's hopes for a stronger foreign policy and its plans to expand further to the western Balkans, Turkey and Ukraine, and raised questions about its appetite for economic reform amid mounting global competition.

The Dutch "No" vote of 61.6 percent was even more decisive than the nearly 55 percent scored by French opponents of the treaty. Turnout was also a strong 62.8 percent, well above the 39 percent in last year's European parliament election.

EU leaders urged member states to press on and ratify the constitution, but analysts said they should admit the document is dead. EU leaders are due to decide how to proceed when they meet for a regular summit on June 16-17.

"To have such a very, very large turnout after the French vote but also to have such an overwhelming "No" is really crushing for the constitutional treaty," said Richard Whitman from the Royal Institute of International Affairs in London.

Dutch Prime Minister Jan Peter Balkenende, who was criticized for a lacklustre "Yes" campaign, could face a parliamentary vote of confidence on Thursday but it has little chance of success. Balkenende has said he would not quit.

European Commission President Jose Manuel Barroso called on member states to proceed with ratification and not preempt their summit meeting with "unilateral decisions" before then.

Britain faces a decision next week on whether to suspend or go ahead with legislation to pave the way for a referendum. Poland said on Wednesday it would decide how and when to ratify the constitution after the EU summit. It had planned a referendum in October, but the opposition has demanded a delay. The Czech Republic said on Wednesday it would seek an extension of the November 2006 deadline for ratification to give countries that vote "No" more time to reconsider.

The euro has fallen by nearly 10 percent from its level in mid-March, when markets began factoring in the possibility of national rejections of the treaty.

Former European Central Bank chief Wim Duisenberg agreed with (EU President) Juncker that the euro should not suffer lasting damage, but said the votes would be a blow to economic reforms in the bloc. "The political uncertainty created will hamper the efforts in Europe to introduce more structural reforms which are so very, very necessary," Duisenberg told CNN television. "It will take us a couple of years at least to reassemble ourselves."

The result is also likely to make it harder for EU leaders to reach a deal on the long-term EU budget, already difficult because of a looming early German election. Dutch Finance Minister Gerrit Zalm signaled the Netherlands would toughen its demands for a cap to the EU budget after the "No" vote and push for a cut to the Netherlands' per capita contribution, which is the highest of all 25 member states.

It seems to me that when it comes to economics, as a general principle, a rising tide lifts all the ships. Therefore, a strong EU ought to be a good thing for the world. On the other hand, with the Franco-German alliance seemingly set on a policy of triangulating against America at every step, Americans have not been very high on the EU.

In any case, the EU's bureaucratic tangle of a Constitution seemed to be a boat not built to float in the first place.

Many seem to revel in the the defeat of the EU Constitution, but I tend to believe a stable Europe would be more capable of dealing with problems as they come up. In fact, many of them have come up already, and the tendency seems to have been to push them under the rug. The problem is, the lump under the rug only gets easier to ignore when the whole house is in disarray.