A French "No" to the European Union constitution would complicate the European Central Bank's job and could push up interest rates, ECB nominee Lorenzo Bini Smaghi said today.
The Italian Treasury official was speaking at a confirmation hearing for a seat on the ECB's powerful executive board on a day when yet another opinion poll showed French voters poised to reject the charter in a May 29th referendum.
"The ECB's task would be more difficult," he said. The central bank would not necessarily have to raise interest rates immediately if France voted "no", Mr Bini Smaghi added.
But he made clear market turmoil could result and the ECB might have to act to safeguard price stability and the euro with a rate increase. Countries with high debt levels would be hit, and Italy could "suffer considerably", he said.
Mr Bini Smaghi raised memories of 1992 when a Danish referendum rejecting monetary union led to a debt market selloff and Italy temporarily leaving the currency mechanism that preceded the euro.
"But hopefully this won't happen a second time around," Mr Bini Smaghi told the European Parliament Economic and Monetary Affairs Committee.
A poll for France's Le Figaronewspaper and Europe 1 radio on Tuesday gave the "No" camp a 55-45 per cent lead in the referendum battle on the constitution, which requires approval by all 25 European Union nations to come into force.