Quebec: The Separatists Surge And The Markets Tremble

One of the world's longest-running suspense dramas--whether Quebec will separate from Canada--is finally headed for a climax. On Sept. 11, the Quebec National Assembly began debating the ruling Parti Quebecois' plan to make the French-speaking province a "sovereign country." The debate kicked off an all-out campaign by separatists to win a oui vote for sovereignty by Quebec's 5 million voters in an Oct. 30 referendum.

The separatists, led by Quebec Premier Jacques Parizeau, are coming on surprisingly strong. A Sept. 9 survey by Montreal pollster Leger & Leger put support for the oui camp at 50.2%. Although most observers still expect Quebeckers to tilt in favor of staying within the federal union, "the result will be very tight," predicts CEO Jean-Marc Leger. "The federalists are behind" in organization and momentum, he adds.

VOTE OUI. Worries over the outcome are making financial markets nervous. Just weeks ago, the Canadian dollar had risen to an 18-month high amid optimism that Canada would remain united. But the new poll dropped the dollar to U.S. 74.24 cents from its recent peak of 74.93 cents. In response, the Bank of Canada on Sept. 12 hiked its lending rate by 35 basis points, to 6.9%. With the risk of recession already a concern, higher interest rates are the last thing Canada's economy needs.

Even a narrow win by the oui forces would plunge Canada into the worst constitutional dilemma of its 128-year history. "It would be a nightmare," says Brian I. Neysmith, president of Montreal-based Canadian Bond Rating Service. For starters, Quebec would face an immediate crisis trying to roll over its massive debts, he says. By contrast, a non vote would relegate separatism to the back burner for years, although the movement would linger on.

The separatists' unexpected surge is a tribute to the maneuvering of the ever-wily Parizeau. Although he was elected on a platform of hard-line separatism last fall, by this spring it was clear that no more than 40% of Quebeckers would vote for a complete break with Canada. So in a skillful shift, Parizeau is asking voters if they agree Quebec should "become sovereign, after having made a formal offer to Canada for a new economic and political partnership." To be sure, Quebec would still write its own laws, claim its own seat at the U.N., and send its own team to the Olympics. But to avoid economic upheaval, Parizeau in effect proposes to recreate, in a different form, the Canadian confederation he wants to break up. Relations between Quebec and English Canada would be managed by a new superstructure including a joint Parliament.

So far, Parizeau's "partnership" theme has worked brilliantly to win support from "soft nationalists": the 20% of Quebec voters who want autonomy but fear a rough divorce. The hitch is, almost everyone in English Canada thinks Parizeau is peddling an illusion. "The rest of Canada simply doesn't want to deal with Parizeau and his gang," says Vancouver pollster Angus Reid. English Canada would oppose Parizeau's plans to allow Quebeckers to use the Canadian passport, he says, and would veto any form of political association. Says Canadian Prime Minister Jean Chretien, himself a Quebecker: A oui is a "one-way ticket to separation."

Such warnings, the federalists hope, will yet clinch a non vote. Most Quebeckers, they reason, don't want a nasty breakup of the country, ranked by the U.N. as the world's best place to live. But if Parizeau can convince enough of them that Chretien & Co. are crying wolf about the perils of a breakup, he could yet pull off a victory. For Canada, and Quebec, it's going to be a nerve-racking fall.

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