Page last updated at 17:29 GMT, Friday, 13 June 2008 18:29 UK

Euro slides after Irish no vote

Euro and pound notes
The euro hit a monthly low against the dollar as news of the vote emerged

The euro has fallen against the dollar and the pound after Ireland rejected the EU's reform treaty in a referendum.

Irish voters' decision not to back the Lisbon treaty throws the EU's lengthy efforts to revamp its institutional structures into fresh confusion.

The euro fell to $1,5301 against the dollar and 78.88 pence against sterling once the result became clear.

European leaders argue the changes are needed to make the EU function better and support stronger economic growth.

Currency reaction

The treaty's future is now uncertain although European Commission President Jose Manuel Barroso has insisted the process to ratify it in other EU states is still "alive".

The value of the euro, which is used by 15 European nations, has sharply appreciated against both the dollar and sterling this year.

But the euro fell sharply after voters in France rejected the EU constitution in 2005 and analysts said something similar could happen this time around.

"It cannot be ruled out that the failure of this treaty may result in further strong declines ... in the days and weeks ahead," Valentin Hofstaetter, an analyst at Austrian bank RZB, said.

Recent suggestions that the European Central Bank (ECB) will soon raise rates across the eurozone to combat growing inflationary concerns have further bolstered the euro.

Inflationary pressures are mounting in Europe's leading economies with figures published on Friday showing German consumer prices were 3% higher last month than a year ago.

But the ECB faces a difficult decision as economic growth is slowing across Europe in response to the US economic downturn and the global squeeze in credit markets.

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