France and Europe reel from loud French "No"

PARIS, Monday (Reuters) France and Europe reeled on Monday from a resounding French "No" vote that could sound the death knell for a proposed constitution for the European Union.

Defeated in one of France's biggest referendum turnouts for years, President Jacques Chirac hinted he could replace Prime Minister Jean-Pierre Raffarin, who told reporters after meeting Chirac to expect unspecified political developments by Tuesday.

In a turnout of 69.7 percent, many voters used the poll to punish Chirac's conservatives over France's fragile economy and high unemployment. The 72-year-old leader promised changes but ignored calls from some opponents to step down.

The charter, designed to ensure smooth decision-making in the enlarged bloc, requires the backing of all member states to enter into force. EU leaders said the treaty was still alive but acknowledged the French result hit its chances elsewhere in the 25-nation bloc, notably in Wednesday's vote in the Netherlands.

"There is a risk of contagion," European Commission President Jose Manuel Durao Barroso told French LCI Television after results of Sunday's referendum showed 54.87 percent of French voters voted "No", a higher margin than most expected.

A Dutch rejection is seen making it harder for EU leaders to call repeat votes in countries that turn down the charter.

"It's always been said in the Netherlands we should not become Europe's village idiot by voting 'No'. This will give the Dutch more confidence to say 'No' to this constitution," Dutch Socialist Party member Harry van Bommel told Reuters.

The result drove the euro down half a percent to $1.2505 in European trade. With markets closed for a holiday in London and the United States, the full impact could be felt on Tuesday.

While the outcome was not seen jeopardising the monetary union that underpins the euro, leaders feared the expected political uncertainty could hit investment and reform efforts.

"It cannot be positive for the economy of Europe," Jean-Claude Juncker, prime minister of current EU presidency-holder Luxembourg, told French RTL radio.

Nine countries representing nearly half the EU's 454 million citizens have approved the constitution and leaders from Greece, Poland and Denmark said the process must continue as planned.

With a renegotiation of the charter seen impossible, Barroso said EU leaders would study options at a June 16-17 summit.

EU rules leave open what would happen in the event of one or more rejections, and EU officials stress they have no "Plan B". British Prime Minister Tony Blair told reporters on a visit to Italy the EU needed "time for reflection", adding it was too early to say whether Britain would proceed with its referendum.

The outcome resonated as far as EU-hopeful Turkey, where the government said the vote was a French matter.

The EU's executive Commission in Brussels said there was no link to plans to open entry talks with Ankara on Oct. 3, but others were less sure.