Koers euro daalt na Frans nee (en)

EUOBSERVER / BRUSSELS - The euro fell to 1.2474 against the dollar on the first day of trading after the French referendum (30 May) - its lowest level in seven months - but analysts said the no vote will not have a major impact on European investors.

"The euro may have a little further to go, it could well hit 1.23 or 1.22, we just don't know yet"' a source at Anglo-irish Bank told EUobserver, adding that the gradual decline of the common currency set in months ago as French opinion polls began to predict a no result.

Deutsche Bank added that the euro is sliding due to concerns that France and Germany will now find it more difficult to cooperate on financial initiatives, as well as a general, longer-term malaise in the eurozone economy.

But other financial pundits said there is "no question" of an extreme scenario such as France leaving the eurozone or the EU itself unravelling, despite enthusiastic speculation in the eurosceptic camp.

"There is no feeling in the market that the euro has failed. There is no issue there at all", the Anglo-Irish Bank contact stated, while Global Equities' chief economist Jean-Francois Virolle described the French vote as "quite a non-event for the stock market and the currency market".

Credit Suisse global equity strategist Christian Gottiker also sounded a calm note, saying "There is no implication that the constitution will not go through at all - it's not the first time the EU has faced trouble coming to the vote, and they always find a way around it".

European investors also seemed to indicate their faith in the long-term viability of the European project, with the no vote hardly causing a ripple on the stock markets yesterday.

The CAC-40 index of firms traded on the Paris bourse fell by less than 0.1 per cent by 16:45 CET on the day after the referendum, the Frankfurt DAX index climbed by 0.82 per cent and shares rose modestly in Warsaw.

The London and New York stock exchanges were closed for holidays, helping to deaden the reaction.

On the bond markets, some investors drifted slightly from poorer member states such as Portugal and Hungary toward larger economies such as Germany, however.

Winners and losers

Global Equities' Mr Virolle also speculated that the no vote might even work in France's favour, by giving the government a freer rein to stimulate the economy through raising public spending.

The slightly lower euro could also give a short-term fillip to European exporters, who have struggled to compete with the weak dollar over the past year, although a prolonged weakening of the euro would risk inflation and higher interest rates.

Analysts said the no result might delay some new member states' entry into the eurozone, as well as Bulgarian, Romanian and Croatian accession, but agreed that the French referendum would not block enlargement per se.

"In the worst case scenario, the EU may well invoke some safeguard clauses, asking Romania in particular to step up some reforms, delaying its entry until 2008", the Anglo-Irish Bank contact noted. "Croatia is just a matter of time", he added.

"Romania and Bulgaria are not in danger", Credit Suisse's Mr Gottiker remarked.

The financial community said that Turkey's bid to start accession talks on 3 October could be in jeopardy though, with up-and-coming French socialist Nicolas Sarkozy and German opposition candidate Angela Merkel both opposed to the move.

"In the space of one year, you could see two new governments come in that would say no to Turkey for a very long time", 4CAST's fixed income strategist, Jose Garcia-Zarate, indicated.

He added that Ankara has pushed through impressive financial reforms in recent years, improving the investment climate in Turkey in its own right.

"We haven't seen any investors fleeing Turkey in the last few weeks", Mr Garcia-Zarate pointed out.

The Istanbul stock exchange also posted growth on the day after the French vote.