European leaders Monday scheduled emergency meetings to take a hard new look at plans for monetary and political union, after the treaty for European unity won French voters' approval by only a wafer-thin margin.
German Chancellor Helmut Kohl and French President Francois Mitterrand said they had hastily arranged a meeting in Paris today to discuss ramifications of the narrow approval of the Maastricht Treaty for European unity in the French referendum, with just 51.05% of voters backing it in the Sunday vote.
Kohl, a chief architect of the treaty, acknowledged that the referendum "raises many questions which we must try in coming weeks to answer."
French Prime Minister Pierre Beregovoy agreed that the close vote was "a warning" both to the government and to the political parties that had supported the Maastricht Treaty, named after the Dutch city where it was initialed by the 12 EC leaders last December.
British Prime Minister John Major, as current president of the European Community, warned that the EC summit conference he has called for early October must "take a profound look at where Europe is going."
"All of Europe's governments need to reflect hard on the lessons of the last weeks and months and on the future direction of the Community," he declared.
In the aftermath of the French vote, currency and shares markets were still unsettled: The stock market rose in Britain but fell in Germany. The German mark, the French franc and the Italian lira were higher, but the British pound dropped even further.
Europe's currency markets, in turmoil last week partly in anticipation of a French vote against the Maastricht Treaty, were relatively calm Monday. The major exception was the British pound, which lost another 2% of its value against the German mark as speculators looked ahead to a possible further reduction in British interest rates.
The pound has fallen from about 2.80 German marks a week earlier to 2.55 marks Monday, a plunge of 9%. Last Wednesday the British government withdrew the pound from the system of fixed exchange rates between EC currencies, arguing that high German interest rates had made it impossible to preserve the pound's value against the mark.
In addition, the French franc and the Irish punt traded Monday at just about their minimum allowable level against the German mark. The central banks of France, Ireland and Germany had to buy francs and punts on the currency markets to prevent their falling too low.
Outside the EC, the roller-coaster ride of Swedish interest rates continued as the central bank reduced the 500% rate on overnight loans to commercial banks to 50%.
Sweden has resorted to punishing interest rates in a desperate attempt to preserve the value of its currency. Monday's reduction in interest rates followed by one day the government's announcement of a package of welfare cuts and tax increases designed to bring the budget closer to balance and increase investor confidence.
In Washington, the head of the International Monetary Fund said that higher U.S. interest rates would help stabilize the world financial system by narrowing the gap between relatively low prevailing rates in most industrialized countries and Germany's higher rates.
But in a bow to political reality, IMF Managing Director Michel Camdessus proposed that the Federal Reserve Board defer any action to increase U.S. rates until after the on-and-off recovery begins to pick up steam.
Since the U.S. economy slipped into recession in mid-1990, the Fed has reduced interest rates by about four percentage points. The Fed's benchmark "discount" rate now stands at 3%, while the prime rate charged by most commercial banks has fallen to 6%.
Speaking to reporters, Camdessus recommended that the Fed "be prompt to implement moderate (interest) rate increases as soon as recovery allows." The press briefing followed a meeting of the IMF's policy-making Interim Committee.
European voters, Major noted, are indicating that they oppose too much centralization in Brussels, but he added that he would work to make "a success of our membership in the European Community."
When the treaty was signed in Maastricht, it carried with it the requirement that it be ratified by the EC member nations. The Danes stunned Europe in June by narrowly rejecting the document in a referendum.
"Now even the French have shown they have serious doubts about the extent of control from Brussels," said Prime Minister Major on Monday, "serious concerns about the threat to their national identity."
The emergency EC summit meeting, and talks leading up to it, will deal with major issues that surfaced in the past few weeks, culminating in the free fall of the pound and Britain's withdrawal from the European Exchange Rate Mechanism (ERM), which tied the European countries' currencies to one another in order to guard against heavy fluctuations in their values.
The first is how to reconstruct the ERM without Britain and Italy, which temporarily suspended membership, in the face of high German interest rates--caused by the need to finance reconstruction of the country's eastern states--and strive again toward a common monetary policy and currency.
Beyond the ERM, the big question remains how to revise the Maastricht Treaty in a way that could satisfy the Danes and implement the accord within the EC. There is still no clear idea of how to proceed, with or without Denmark.
Germany's Chancellor Kohl said the worry in his country about a tighter European Community is that people "could lose their own identity, their own weight, their own face. That is absolutely not the goal of Maastricht."
But Kohl added: "One thing remains completely clear: The path to political unity in Europe remains a common one. We all need this Europe, but we, the Germans, need it more than all the others."
Times staff writers Joel Havemann in Brussels, Tamara Jones in Bonn, Norman Kempster at the United Nations and Jonathan Peterson in Washington contributed to this story.