Chirac names Villepin PM as EU faces Dutch ‘No’ to charter

PARIS (Reuters) — French Prime Minister Jean-Pierre Raffarin became the first victim of a crisis over the European Union’s constitution on Tuesday as EU leaders braced for Dutch voters to follow France by rejecting the new charter.

President Jacques Chirac accepted Raffarin’s resignation and appointed loyal ally Dominique de Villepin — an opponent of the US-led war on Iraq — to replace him in a shake-up that had become inevitable after voters rejected the constitution.

The result of Sunday’s referendum has plunged the 25-nation EU as well as France into crisis.

Those problems are likely to deepen when the Netherlands holds a referendum on the treaty on Wednesday because opinion polls point to another heavy defeat.

“We had hoped for a neck-and-neck race [but] … it looks as if it is going to be a ‘No’ vote,” Dutch Foreign Minister Bernard Bot told CNN television. Concerns that the charter, intended to ensure the enlarged EU runs smoothly, is now close to death helped drive the euro down to new seven-month lows against the dollar and unsettled stocks and bonds. The euro sank as low as $1.2312 on Tuesday before rising back to $1.2317. This reflected the EU’s problems, which also include an early election in Germany, with which France is the traditional driving force of European integration. “The magnitude of the French ‘No’ was surprising and it is likely to be ‘No’ with a fairly large margin in the Netherlands, and it terms of investor sentiment it raised political uncertainty,” said Adam Cole, a senior currency strategist. Nine countries representing nearly half the EU’s 454 million citizens have approved the constitution, but Denmark, due to vote on September 27, said next month’s EU summit must decide if ratification should proceed in remaining member states. The EU’s first constitution sets new rules for the Union designed to make decision-making easier after it took in 10 new members last year, mostly from eastern Europe, but it requires the backing of all 25 member states to go into force. EU leaders are urging member states to continue the ratification process, but a Dutch rejection would make it harder for them to call repeat votes in countries that oppose the charter and this could deal it a fatal blow.

Despite the deep crisis in France over the charter, Chirac has ignored calls to quit. But he made Raffarin the scapegoat and signalled he would make some policy adjustments to take account of voters’ dissatisfaction which is as much to do with domestic politics as with disillusionment with the EU.

Chirac was due to address the nation late on Tuesday, his third nationwide address in less than a week — a fact that highlights the depth of the crisis facing France.

As a loyal ally, Villepin will have the task of steadying the ship of state as the 72-year-old president considers whether to seek a third term as president in an election due in 2007. Villepin, 51, has good relations with his European allies, which will be useful as the EU tries to rally together following the rejection of the constitution by one of its key members.

But he angered the United States with his fierce opposition to the US-led war in Iraq when he was foreign minister, and US-French ties are only now emerging from a deep chill. Villepin will have to rebuild public trust in a leadership that has lost the faith of voters because of economic problems including unemployment, which remained at a five-year high of 10.2 per cent in new figures released on Tuesday. In a measure of French citizens’ concerns about the economy, the national statistics office said on Tuesday consumer confidence was at its lowest level since at least November 2003.

A new poll in the Netherlands showed 60 per cent of voters opposed the charter, five per centage points more than the number who rejected the constitution in France. One poll even showed 65 per cent of voters plan to vote against. Support for the European Union in the Netherlands, like France one of the bloc’s six founding members in the 1950s, was traditionally strong but has taken a knock in recent years against a backdrop of rising political and social problems.

Prime Minister Jan Peter Balkenende’s centre-right government is deeply unpopular as public disquiet about immigration and security has been compounded by sluggish economic growth, rising unemployment and budget cuts.