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French EU Constitution Rejection to Hit Euro, Sunday Times Says

French EU Constitution Rejection to Hit Euro, Sunday Times Says

May 29 (Bloomberg) -- French rejection of the European Union constitution may see investors sell the euro and could lead to low economic growth and high inflation, or stagflation, for the region, the Sunday Times said, citing economists.

A ``No'' vote in France, followed by the Netherlands, is widely expected but hasn't been fully factored into the market, the newspaper said. An Ideaglobal.com survey showed analysts expected a French rejection of the constitution to push the euro lower, with many predicting the fall to be ``significant,'' the newspaper said.

A slide in the euro would make a near-term cut in interest rates by the European Central Bank less likely, and could knock business and consumer confidence, the Sunday Times said. Stock markets and the euro would probably rally if French voters approve the constitution, the newspaper said.

Eight polls this past week showed a majority plan to vote against the treaty, a protest against President Jacques Chirac, whose popularity has sunk to an eight-year low. In the final polls, published May 27, one by Ifop showed opposition at 56 percent and one by CSA put it at 52 percent. No margin of error was given.

(Sunday Times 5-29, Business 1)

For the Times of London's Web site, see {<TTMS <GO>}.

To contact the reporter on this story:
Sophie Hares in London at [e-mail].


LINK: http://www.bloomberg.com/apps/news?pid=10000085&sid=a_kvj8oVtADo&refer=europe