2/6/2005

BRUSSELS (Reuters) – A stunned European Union warned against panic on Thursday after the Dutch joined France in a resounding &#34No&#34 to the bloc”s constitution, putting both further expansion and decision-making in jeopardy.

The euro touched an eight-month low after the Dutch vote, but European Central Bank President Jean-Claude Trichet said any talk of the single currency”s demise was absurd.

The popular rejection by two of the six nations that founded the bloc in the 1950s was for many the end of the charter, drawn up to make the Union run more smoothly after its enlargement to 25 states from 15 last year.

All 25 must ratify the treaty for it to come into force.

But no EU leader publicly declared the constitution dead. Brussels officials insisted that talks to bring in new members would go on, and called for a redoubling of efforts to reach a deal on the bloc”s contested long-term budget.

European Commission President Jose Manuel Barroso, who wants member states to proceed with ratification despite the votes, warned against hasty conclusions or &#34unilateral decisions&#34 before a summit of EU leaders in Brussels on June 16-17.

&#34We”re in a period of reflection,&#34 he told reporters at the European Parliament. &#34A great virtue in politics is prudence. If there is a problem, we have to look at it collectively.&#34

Italian Prime Minister Silvio Berlusconi, who hosted a leadership signing ceremony for the constitution in Rome last year, said &#34nobody right now has a definitive answer.&#34

French President Jacques Chirac and German Chancellor Gerhard Schroeder, whose countries were long seen as the motor of the EU, will discuss the crisis in Berlin on Saturday.

Latvia”s parliament overwhelmingly approved the constitution on Thursday, meaning 10 members representing almost half the EU”s 454 million citizens have now endorsed it.

The Latvian government trumpeted its backing for the charter as a &#34belief in Europe&#34 and an example for others to follow.

But that news, greeted with ironic applause at the daily European Commission briefing, did little to lift the gloom in Brussels after the &#34No&#34 vote of 61.6 percent in Wednesday”s Dutch referendum — even more decisive than the nearly 55 percent rejection in France three days earlier.

&#34I hope this will bring the European Union out of its torpor and force its leaders … to show leadership,&#34 said Graham Watson, Liberal leader in the EU Parliament. Britain faces a decision next week on whether to suspend or go ahead with legislation to pave the way for a referendum.

Minister for Europe Douglas Alexander told BBC radio that Britain — where voters are more euroskeptical than the Dutch or French — would not unilaterally declare the constitution”s demise and would seek a consensus with its partners.

&#34It”s not for one country to declare it dead,&#34 he said.

The EU”s budget commissioner voiced concern that navel gazing over the constitution could distract leaders from ending a tug-of-war over the bloc”s long-term finances, crucial to keep a seven-year plan to spend nearly one trillion euros on track.

&#34Growing political uncertainty … will influence the talks,&#34 Dalia Grybauskaite told Reuters, calling for a quick deal to demonstrate that the bloc is still working.

The two referendums also cast doubt on aspirations for a stronger EU foreign policy and its plans to expand further into the Balkans, Turkey and Ukraine, and raised questions about its appetite for economic reform amid mounting global competition.

EU Enlargement Commissioner Olli Rehn said enlargement would proceed despite the French and Dutch votes, but letters would be sent to Bulgaria and Romania, expected to join in 2007, warning them the pace of their pre-entry reforms is insufficient.

Luxembourg Prime Minister Jean-Claude Juncker, whose country holds the EU presidency, said the Dutch and French rejections did not alter the economic fundamentals underpinning the euro.

The currency shared by 12 members of the EU touched an eight-month low after the vote in the Netherlands.

The euro has lost nearly 10 percent against the dollar since mid-March but it rebounded on Thursday to trade at $1.2255 after falling to $1.2158 in New York late on Wednesday.

An economic adviser to Barroso, Paul De Grauwe, told the Belgian financial daily De Tijd that the euro zone”s monetary union was in danger of falling apart if it was not backed by wider political integration, a key aim of the constitution.

But Trichet said any talk of the failure of monetary union was &#34complete nonsense.&#34

&#34It is totally absurd and I will not comment any more than that,&#34 he told a news conference after the central bank rejected calls for a cut in interest rates to reverse an economic slowdown in Europe.

The French &#34No&#34 vote on Sunday forced the prime minister to resign and prompted a government reshuffle, but Dutch Prime Minister Jan Peter Balkenende ruled out quitting.