FRANCE'S REFERENDUM ON EU CONSTITUTION: INTERNAL

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 003659

SIPDIS

SENSITIVE

DEPT ALSO FOR EUR/WE, EUR/ERA, EUR/PPD, DRL/IL, INR/EUC AND
EB
DEPT OF LABOR FOR ILAB
DEPT OF COMMERCE FOR ITA

E.O. 12958: DECL: 04/07/2015
TAGS: PGOV ELAB EU FR PINR SOCI ECON
SUBJECT: FRANCE'S REFERENDUM ON EU CONSTITUTION: INTERNAL
POLITICAL CONSEQUENCES

REF: (A) PARIS 3625 AND PREVIOUS

Classified By: Charge Alex Wolff for reasons 1.4 (b) and (d)

SUMMARY
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1. (C) Whatever the outcome on May 29, none of the purely
domestic political/economic issues that have so divided the
French electorate during the referendum campaign will have
been resolved. Rejection of the political class, along with
the high unemployment, diminished purchasing power and
economic insecurity -- all the issues that have driven the
"high tide of 'no'" -- will still be there after the
referendum. Regardless of the outcome May 29, Chirac will
probably change prime minister and reshuffle the cabinet, but
he is unlikely to undertake significant, market-oriented
economic and social reforms. Chirac may well embrace a 'no'
retroactively, positioning himself as the defender French
people against untrammeled "Anglo-Saxon" capitalism.


2. (SBU) (Summary Continued) The "victory" of a 'no' to the
proposed constitution on May 29 would add to President
Chirac's difficulties in mounting a credible bid for a third
term and give significant tactical advantage to the
presidential ambitions of Nicolas Sarkozy, the president of
Chirac's Union for a Popular Movement (UMP) party. Whatever
the referendum result, resolving the bitter, 'yes' versus
'no' schism on the center-left will require a unifying figure
of undeniable stature among center-left voters, such as
former Socialist Party (PS) Prime Minister Lionel Jospin.
Barring a last-minute, radical surprise from President Chirac
(such as dissolving the National Assembly and calling for
early elections in order to separate the EU constitution
question from domestic dissatisfaction),a 'yes' victory,
like a 'yes' defeat on May 29, largely clears the way for a
battle for primacy within the center-right and center-left.
END SUMMARY.

CONSEQUENCES FOR DOMESTIC POLICY DIRECTION
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3. (SBU) The high unemployment, diminished purchasing power
and economic insecurity that have been the strongest engines
of pro-'no' sentiment receive a great deal of rhetorical
attention from leaders of both the 'yes' and 'no' camps, but
little in the way of practical policy proposals for solving
these persistent social and economic problems. The
structural reforms that would durably cut down France's high
unemployment and make the economy more competitive, if
undertaken right after the referendum, would require at least
eighteen months of belt-tightening and dislocation before
taking hold. The presidential election of 2007 is eighteen
months away. The recent experience of his close ally
Chancellor Schroeder in Germany is not lost on President
Chirac: the medium-term pain required to effect long-term
reform has immediate consequences at election time. Whatever
the referendum result May 29, it is unlikely President Chirac
will change his administration's policy direction in the
social and economic sphere. If anything, Chirac has become
more statist in his orientation and more solicitous of the
constituencies likely to support him -- for example,
conservative rural folk -- who in different ways are
dependent on the French social model and its state handouts
of various kinds.

SHORT-TERM POLITICAL CONSEQUENCES
--------------

4. (SBU) In the last days leading up to the referendum,
press and TV commentary has been rife with speculation about
who Chirac will choose to succeed Prime Minister Rafferin.
Unlike in the many prior rounds of speculation about the end
of his tenure, this time Rafferin himself has indicated that
his days in office may be numbered. Chirac clearly has to
reckon with and react to the rejection and dissatisfaction --
the high tide of 'no' -- that makes the referendum a
plebiscite about him and his leadership. However, none of
his options for changing prime minister in order to breathe
new life into his second term particularly recommend
themselves to him.

5. (C) All the leading candidates have serious drawbacks for
Chirac, not least long-time Chirac rival and president of the
ruling Union for a Popular Movement (UMP) party Nicolas
Sarkozy. Sarkozy, should Chirac ask him to take the job
(most likely in the case of a 'no' victory by a large
majority -- over 52 percent),will likely demand considerable
leeway to enact reforms and also insist that he remain in
control of the UMP. A whirlwind, "hundred days" of activism
with Sarkozy at the helm can be envisioned as the best "way
out of the impasse of 'no'" for Chirac. However, Sarkozy's
response to a 'no' -- reformist policies to address head-on
France's economic stagnation -- would likely be incompatible
with Chirac's championing of France's social model. Such a
tandem, hobbled by both policy differences and conflicting
political ambitions, is increasingly difficult to imagine.


6. (C) Defense Minister Michelle Alliot-Marie is the least
flawed of the other candidates. She has done a commendable
job at defense, is a Chirac loyalist and would clearly bring
a new and energetic image to the role of prime minister.
Interior Minister Dominique de Villepin is considered too
easily carried away by his enthusiasms -- to the point where
some question his judgment. Finance Minister Thierry Breton
has not been at his current post long enough to establish a
track record. In addition, another factor that may put him
out of the running is that he is not an experienced
politician. Some believe Chirac's personal preference is to
wait, putting an interim figure in the post, until former
Prime Minister Alain Juppe's ineligibility to run for public
office due to a misdemeanor conviction on corruption charges
ends late this year. The dark horse candidate for the prime
minister's job, in many ways fitting the bill of "interim
figure," is Social Cohesion Minister Jean-Louis Borloo. A
successful centrist politician from northern France, Borloo's
appointment as prime minister would confirm Chirac's
intention to focus on government sponsored social programs,
rather than-market oriented reforms, during the remainder of
his second term. In the event of 'yes' victory in
particular, Chirac could again confound expectations and keep
Raffarin at his post until a change, closer to the election,
is likelier to produce a lift in the polls for a Chirac
candidacy in 2007.

CONSEQUENCES FOR CHIRAC
--------------

7. (C) The conventional wisdom is that a 'no' victory would
deal a crippling blow to Chirac's re-election possibilities,
while strengthening Sarkozy's position as the only candidate
able to unite the center-right. Chirac is not a popular
figure; he received less than 20 percent of the votes in the
first round of the last presidential election in 2002. A
'no' victory would discredit him even further. Even so, his
record of eliminating rivals and skill in positioning himself
to end up as the figure most acceptable to the largest number
should not be underestimated. In addition, there is still a
current of strong opposition to Sarkozy within the UMP.
Sarkozy's recruitment drives for new party members and
advocacy of primaries to designate party candidates are an
effort to counter opposition to him among Chirac loyalists.
A 'no' victory would make it much easier for Sarkozy and his
allies to suppress this opposition, but it will not disappear
entirely -- and it will always be ready to take advantage of
any misstep or weakness on Sarkozy's part.

CONSEQUENCES FOR THE LEFT
--------------

8. (C) France's system of state financing of political
parties will keep the Socialist Party (PS) a single entity
despite the deep and bitter schism prompted by its
"dissident" 'no' camp. Whether 'yes' or 'no' wins on May 29,
the ensuing struggle -- less for control of the party than
for taking the role of unifying figure, able to rally the
socialist electorate in view of 2007 -- will be intensely
contested. Former socialist Prime Minister Laurent Fabius,
who believes that his having challenged the establishment by
advocating 'no' should allow him to win the support of all
"the people of the left," will seek to displace National
Secretary Francois Hollande as party leader. It is unlikely

SIPDIS
that Fabius, never popular among party members, can win a
party election, particularly against what is sure to be the
determined opposition of the party's mainstream leadership.

...AND LIONEL JOSPIN
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9. (C) Unless last minute fear of the consequences of a 'no'
victory prompts a surge of pro-'yes' voter turn-out among the
undecided on May 29, and 'yes' wins by a strong majority,
Francois Hollande will be unable to claim the role of unifier
(and leading candidate) of the center-left. A narrow victory
either way will leave the party divided, unable to unite
behind the leaders of either its 'yes' or 'no' camps. Only a
figure of unquestioned stature among voters across the
spectrum of the socialist electorate could fill that unifying
role. Former socialist Prime Minister Lionel Jospin --
emerging from retirement at just the right moment -- could,
providentially, be at hand to make himself useful in exactly
that way.

READY TO TAKE ADVANTAGE OF THE RESULT
--------------

10. (C) Three days before Sunday's referendum, polls
continue to show that, among decided voters, 'no' to the
proposed constitution holds the lead over 'yes.' According
to some polls, as many as a third of voters remain undecided.
President Chirac, hoping the polls and pundits are wrong,
would exploit a 'yes, casting it as an endorsement to bolster
his battered standing with the electorate. In the more
likely case of a 'no' victory, President Chirac is likely to
attempt to co-opt to his own benefit the sentiment of fear
underlying many voters' rejection of the constitution.
Today's Chirac, champion of the 'yes,' may well attempt to
emerge from defeat a chastened politician ready to lead the
electorate's desire for security in a world where
globalization and the European drift towards an Anglo-Saxon
model of untrammeled capitalism threaten the French way of
life. It would not be beyond him to make the substance of
the 'no' cause retroactively his own. END COMMENT.
WOLFF