EU warns against panic after double No vote

European Union leaders, shocked by the French and Dutch rejection of their constitution, tried on today to show that it would…

European Union leaders, shocked by the French and Dutch rejection of their constitution, tried on today to show that it would not paralyse the 25-member bloc.

German Chancellor Gerhard Schroeder signalled that Berlin was ready to compromise in a long-running wrangle over the EU's long-term budget and European Enlargement Commissioner Olli Rehn vowed that the drive for new members would go on.

"Europe cannot be put on hold," European Budget Commissioner Dalia Grybauskaite told said in Luxembourg, the EU's current president, made a new attempt to break a deadlock over multi-billion-euro spending plans for 2007-2013.

The popular rejection by two of the six nations that founded the bloc in the 1950s was for many the end of the charter. The treaty must be ratified by all members to come into force.

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But no-one publicly declared the constitution dead. European Commission President Jose Manuel Barroso, who wants member states to go ahead with ratification despite the votes, warned against "unilateral decisions" before an EU summit in Brussels on June 16th-17th.

"We're in a period of reflection," he told reporters at the European Parliament. "A great virtue in politics is prudence. If there is a problem, we have to look at it collectively."

The euro touched an eight-month low after the Dutch vote yesterday, but European Central Bank President Jean-Claude Trichet said any talk of the single currency's demise was as absurd as imagining California breaking away from the dollar.

The Bank flatly rejected calls for an interest rate cut to help reverse Europe's economic slowdown, which was partly to blame for the resounding "No" votes.

Luxembourg Prime Minister Jean-Claude Juncker gave ground to the bloc's six main paymasters in a new compromise proposal to wrap up a deal on the long-term budget at the mid-June summit.

Mr Schroeder, whose country is the biggest net payer, emerged from talks with Mr Juncker in Luxembourg declaring he was willing to compromise, despite an early general election in September which some diplomats had feared would tie his hands.

"We are ready to move," the chancellor said.

One silver lining was Latvia's parliament overwhelmingly approval of the charter today, meaning 10 members representing almost half of the EU's 454 million citizens have now endorsed it.