The Road To A Unified Europe Could End Suddenly In France

It's summertime in Europe, and the living is queasy. To be sure, Parisians are still packing their bags for their annual August exodus to the beaches. But politicians and the big financial-market operators are spending the dog days biting their nails in trepidation over Frances Sept. 20 referendum on the Maastricht Treaty.

In June, when President Francois Mitterrand called for the vote on European economic and political unity, a yes seemed virtually assured. But now the possibility is looming that French voters will say no as a way of taking a swipe at their increasingly unpopular President. In recent weeks, opposition to Maastricht has climbed to about 45% as Mitterrand's government has been whipsawed by truckers protests and a corruption scandal. But the most damaging news has been the spectacular trial of four senior government health officials who during the mid-1980s allegedly neglected to test and treat blood they knew was contaminated with HIV, the virus that causes AIDS. As a result 1,300 hemophiliacs are believed to have contracted the virus.

COMING UNGLUED? Because Mitterrand has been such a key architect of European unification, a rejection of Maastricht, coming on top of Denmark's rejection in June, would stop the drive for economic union and a single currency. Such fears have already spooked investors, who have been betting that unification would force the disparate governments to bring down inflation and deficits. The jitters have helped push up short-term interest rates in Italy and Spain and have nearly shut down trading in the once-hot market for bonds denominated in European Currency Units.

Traders fear a French no could threaten the European Monetary System, which links foreign exchange rates. If Maastricht stumbles in France, the leaders of economically shaky countries such as Britain, Italy, and Spain might face a currency devaluation crisis. Already, British businessmen are urging Prime Minister John Major to devalue the pound to help Britain shake off a two-year recession. Currencies in Italy and Spain are increasingly anemic. "Within a week of a no vote in France, the EMS will fall apart," with the British pulling out, predicts Malcolm Roberts, head of bond research at London's UBS Phillips & Drew.

With so much at stake, European bureaucrats in Brussels have all but closed up shop to avoid any controversy that might hurt the unity cause in France. And Mitterrand is pulling out all stops. Socialist politiciansas well as nationalist and centrist opponents of Maastrichtwill vigorously work the beaches and holiday spots to sway voters. Newspapers and billboards are festooned with ads. A Socialist billboard shows a U.S. comic book figure and a Japanese sumo wrestler dominating the world and urges the French to vote yes to give Europe the heft to take on the two economic titans. But the campaign suffered a blow when authorities prevented the government from running pro-Europe messages as public service ads on TV.

While Mitterrand has been urging voters not to confuse their feelings about him with Maastricht, he hasn't been helped by the corruption charges against the Socialist president of the French National Assembly, Henri Emmanuelli, and the blood scandal, which has damaged Laurent Fabius, who was Prime Minister at the time.

Even if Mitterrand can deliver France, Europe will continue to be roiled by increasing opposition to unity in Britain and even Germany. This growing backlash will likely keep leaders on edge for months.

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