Brussels holds its breath as French ponder their verdict on constitution

European Diary: A brief sunny spell in Brussels yesterday brought the tables outside the restaurants along rue Archimède, the narrow street next to the Berlaymont where many EU officials like to lunch.

As two o'clock passed and the clouds reclaimed their usual place above Europe's capital, few of the hungry bureaucrats were in any hurry to return to their desks.

An uneasy silence has fallen over Brussels in recent weeks, as commissioners and officials strive to avoid any word or action that could threaten the outcome of next month's referendum in France on the EU constitution.

A proposal to overhaul rules governing the investment aid EU governments can offer companies to set up in their countries has been postponed for fear of upsetting French voters.

The controversial services directive inherited from his predecessor by Charlie McCreevy may not be officially dead, but it is sleeping soundly and will not be disturbed until after the French vote on May 29th.

The EU Commission president, José Manuel Barroso, has stopped preaching the virtues of the economic reform agenda he has placed at the centre of his Commission's five-year programme. Mr McCreevy himself is keeping his head down, although he is said to be beavering away quietly on a plan to open up the European market in mortgages.

Ten successive opinion polls showing a majority in France against the constitution have left Brussels frozen in panic. The potential consequences of a French rejection of the constitution for the European project are almost too dreadful for EU politicians to contemplate.

The potential for pointing the finger of blame, on the other hand, is all too clear and key actors are already manoeuvring to ensure it does not face in their direction.

If France votes No, almost everyone in Brussels will blame President Jacques Chirac, accusing him of calling a referendum unnecessarily and failing to make the case for the constitution effectively.

They will point to Mr Chirac's domestic unpopularity and argue that a No vote represents a rejection of the president and his policies rather than of the constitution itself.

The finger of blame is fickle, however and it could soon turn towards Brussels, singling out Mr Barroso for his intemperate intervention last month in support of the Services Directive. In a speech to an economically liberal think tank, Mr Barroso declared that the commission's task was not to defend the 15 old member states against the 10 new countries that joined the EU last year.

The remark drew applause from his audience of free market zealots, but reinforced fears in France and Germany that EU enlargement would lead to greater economic insecurity in the old member states.

From the day he arrived in Brussels last November, Mr McCreevy has set out to ensure that no blame for a French No should attach to himself, distancing himself from the Services Directive in its present form and promising that he would have nothing to do with any legislation that would lead to "social dumping".

Regardless of the recriminations, EU leaders will face a difficult decision if France votes No, particularly if Dutch voters follow suit a few days later. Conventional wisdom states that the constitution cannot recover from two such rejections and that, unlike the Irish after Nice, the French will not be asked to vote a second time.

Some analysts predict that a French No could precipitate a Franco-German union or a "core Europe" around the six founding member states.

However, such a development is unlikely to happen immediately, not least because Mr Chirac could be so badly damaged by a No vote that he would lack the political authority to launch such a project.

The constitution was agreed after more than two years of negotiations, first in a convention made up of government representatives, MEPs, national parliamentarians and the commission and later in talks between governments. Some EU leaders may be reluctant to abandon an agreement with such a provenance and could call for a minor renegotiation to address French concerns, followed by a second referendum.

If France rejects the constitution because it does not adequately protect "social Europe", such a renegotiation would have to offer a plausible guarantee against social dumping.

One change that could offer such a promise is the abolition of the national veto on tax policy - a move that could lead to tax harmonisation within the EU.

Such a proposal would present the Government with a nasty dilemma - a choice between the constitution so deftly negotiated during the Irish EU Presidency and the retention of sovereign control over tax policy.

The prospect of such a choice offers one more reason why the occupants of Government Buildings and Iveagh House will join their counterparts in the Berlaymont in hoping - silently, but with deep fervour - that the French will change their minds between now and May 29th.