Fate of EU treaty in the balance as Irish vote

By Andras Gergely and Jonathan Saul

DUBLIN (Reuters) - Ireland voted on Thursday in a referendum that will decide the fate of a European Union reform treaty intended to make the 27-nation bloc stronger and more effective.

An opinion poll last week put opponents of the Lisbon treaty ahead for the first time, alarming EU leaders because the plan could be doomed if Irish voters reject it and no alternative plan has been prepared.

The approval of all member states is required for ratification of the treaty, which replaces a constitution rejected by French and Dutch voters in 2005.

Ireland is the only EU nation holding a referendum this time, meaning a country accounting for less than 1 percent of the EU's 490 million population could derail a pact designed to streamline how the fast-expanding bloc is run.

The treaty envisages a long-term president of the European Council of EU leaders, a stronger foreign policy chief and a mutual defense pact. It would also develop a more democratic voting system and give a greater say to Europe's parliaments.

The last opinion poll of the campaign, published at the weekend, showed opponents of the treaty gaining ground but put the "Yes" vote narrowly ahead again.

Finance Minister Brian Lenihan told Reuters canvassing by his party indicated the "Yes" camp had regained momentum but said the EU had no fallback position if the pact is rejected.

"You are talking about a coat that was knitted together by 27 different countries," Lenihan said after casting his vote in Dublin. "It is very difficult to knit that coat again."

Fourteen countries have already ratified the treaty in their national parliaments but EU leaders fear some countries such as Britain may suspend the process if Ireland votes "No".

The "Yes" camp says Ireland's diplomatic clout and an economy already reeling from a property downturn would suffer if voters rejected reforms drawn up by a Union whose support underpinned the "Celtic Tiger" economic boom.

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Lenihan said the economy clearly faced serious challenges. New data on Thursday showed shoppers continue to rein in spending and unemployment is rising, although it is below the European average.

Most economists believe a "No" vote might dent the investor appeal of a country that has marketed its unusual position as a strongly pro-European, English speaking member of the euro zone but they do not see any serious long-term consequences.

"A lot will depend on how it will be taken by the EU (executive) Commission and other EU countries," said AIB Chief Bond Economist Oliver Mangan. "I wouldn't expect a major economic fallout from a 'No' vote."

Voting before heading into work, 45-year-old John Devlin said he expected the vote to be "very tight" but that he hoped and believed it would be carried.