The polls still indicate the treaty will be approved, but of those who have made up their minds only 53 per cent now say they will vote yes, against 70 per cent in June. Moreover, there is a worryingly large number of 'don't knows'. Fears have thus grown that the French would use the vote to express mounting discontent with President Mitterrand.
According to the doomsday scenario now widespread in the financial markets, a rejection could provoke the gravest test for the European Monetary System since it began in March 1979.
Denmark's rejection of the treaty is the only precedent available to gauge the potential reaction. The markets had believed that a non-inflationary European currency, modelled on the German mark, was a foregone conclusion, and that the existing target parities for European currencies would hold until it happened. That scenario would turn even traditionally inflationary countries like Italy and Spain into good risks.
After the Danish vote, the markets pushed up the mark sharply: there was a traditional 'flight to quality'. The Italians were forced to raise interest rates to 18 per cent at one point to stem the flow out of the lira and keep the currency within its EMS bands. Spanish and Italian government bonds fell sharply. Ecu bonds also fell.
As France has been the driving force behind European monetary integration, the reaction to a 'non' would be much more intense. 'It would effectively bury monetary union for good,' Gavyn Davies, chief economist of Goldman Sachs, said. 'There would be a very severe speculative attack on the system as a whole.'
A French rejection might, for example, undermine the Mitterrand government's policy of a franc fort and its steadfast objection to a revaluation of the mark, since this policy rests on the assumption that economic and monetary union (EMU) will be achieved. Even if there were no obvious change of policy, the government's prestige would be seriously weakened.
There would certainly be a rush to buy the mark, the world's strongest currency because of Germany's high interest rates and the underlying strength of the German economy. Above all, the mark's attraction is enhanced by the perception that, despite a temporary period of rising prices, the Bundesbank will continue to be the most successful of central banks in taming inflation by keeping rates high for as long as it judges necessary, whatever the outcry.
The countries with the weakest economies in the system would face a stark choice; either to raise their interest rates to slow the tide of money heading for the mark, or to devalue their currencies.
The former option might have been acceptable in good economic times. But with many European countries economically stagnant or in danger of weakening further, it might be unpalatable.
'It would be close to impossible to avoid an overall realignment of the EMS,' Jim O'Neill, head of research at Swiss Bank Corp, said. 'The pound, the lira and the peseta - and possibly others - would have to devalue.'
Alternatively, governments could tough it out, raising interest rates to defend existing parities. But in spite of John Major's resolve to resist devaluation, few economists are convinced by the British government's insistence that it would raise interest rates in the teeth of continuing recession.
Pressure for a general EMS realignment might give the British government a perfect excuse to change policy. Because of Italy's fiscal crisis, the lira is seen as the most vulnerable currency, and the most likely to be first to come under intense pressure. If Italy called a meeting of EC finance ministers to plead for a mark revaluation, Britain might capitulate and join other countries that were ready to see their central rates against the mark move down. The alternative would be to damage, perhaps fatally, the wafer-thin confidence that is all that stands in the way of deeper UK recession.
Many analysts also believe that the pound is overvalued against the mark in the EMS, despite improved export performance in the two years since full UK membership.
If we take other governments at their word, most of them would resist pressures for a realignment, either by stepping into currency markets or pushing up rates. But there are doubts that they would succeed in the face of enormous pressure for a mark revaluation.
The EMS has never faced such a challenge in a European financial system free from capital controls, most of which were removed in the run-up to the single market and on the assumption that EMU was a foregone conclusion. Speculative flows out of weak currencies into the mark might be much greater than expected because of fears that some member states could be tempted to reimpose those controls.
One possibility that EC finance ministers might have to consider - they will be in Washington for the International Monetary Fund meetings at the time - is that the EMS might have to be suspended temporarily, allowing a free float until the markets settled down.
Another possibility is a two-tier EMS. Belgium and the Netherlands would continue to lock their currencies to the mark, something they have done for years in order to match or better Germany's inflation performance. They would raise rates if they had to and would revalue upwards in line with the mark if that were the choice.
France might well follow suit, and its impressive inflation record of the past few years could help the market's acceptance. But much would depend on how damaged the government became after the referendum. By contrast, Italy and Spain would probably have little option but to devalue.
While this process was under way European markets and probably those elsewhere in the world could be in turmoil. The dollar, for instance, could hit new lows as a wave of money flooded into the mark. But some economists believe that after a highly dangerous interregnum, the upheaval could have some positive results.
The Bundesbank might be tempted into earlier rate reductions because a stronger mark would cut import prices and help subdue inflation pressures. Peter Pietsch, an economist with Commerzbank in Frankfurt, said: 'An up-valuation of the mark would make it easier to lower German rates.' He argued that the Bundesbank could be forced, at the very least, to lower money market rates, to calm the markets down.
The losers would be bond-holders in countries at risk of higher inflation - almost everywhere except Germany. As the bond prices fell to provide a higher return to compensate for inflation, there could be a sharp fall in share prices too.
Mr Pietsch said: 'Perhaps politicians and central banks can manage exchange rates, but stock markets are more difficult, and the uproar would be primarily in the stock markets.'
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