NEW YORK – Wall Street got a shot of good news in the midst of a disappointing week as the dollar strengthened following votes against a European Union constitution in France and the Netherlands.
The purpose of the constitution is to formalize the political union of the 25-member bloc and the 12 nations that share the euro currency. It would streamline decision making and create a framework for market integration that many hope will energize Europe’s flagging economy. Analysts say the economic landscape won’t materially change if the EU constitution is not approved. But in the near term, the perception of a weakening euro is good news for the U.S. market.
“The thought that the juggernaut called the European Union is being slowed by the rejection of the constitution is probably more myth than reality, but on a short-term basis it creates more confidence in the U.S. markets,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. in Philadelphia.
Now, with the constitution’s fate unclear, there’s a growing perception that when it comes to unification in Europe, the shared currency may be as far as it goes. That would leave the euro as an “orphaned currency,” more vulnerable than it would be if it was backed by a national political structure, said Richard Batley, European economist with Schroder Investment Management in London.
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