What do no votes mean for the union?

It was business as usual for the European Central Bank yesterday. Just as it has at every meeting for the past 24 months, it left interest rates on hold. The no votes in France and the Netherlands were brushed aside. The public may have spoken, but what does the public know?

Rather more than the policy elite, it seems. In Britain we've been here before. In the 1950s, the great and the good - the people who really knew what was in the best interests of the lower orders - decided to bulldoze the slums and decant people into tower blocks. In 1968, there was a gas explosion at one of the tower blocks, Ronan Point, which collapsed like a house of cards. It was not the end for tower blocks, but it was never quite the same again.

This week has been Europe's Ronan Point moment. France and the Netherlands were given the chance to pass judgment not just on the next phase of European integration but on the previous phases. The message was that voters don't think the process of ever-closer union is working. In particular, they think monetary union is a dog.

Naturally, that is not a message policymakers want to hear. Voters just don't get it, they say. Ciao Koch Weser, Germany's deputy finance minister, said yesterday that any discussion of the euro being a burden was "crazy". The single currency had been a success which helped boost economic growth.

Sadly for Mr Koch Weser, his analysis does not appear to be playing well with Germany's 5 million unemployed, or with the Dutch voters who blamed the euro for economic stagnation. The ECB yesterday cut its growth forecast for the eurozone this year and predicted another year of economic underperformance.

The problem for Mr Koch Weser is that Europe's voters do get it; they are starting to realise that monetary union was founded on dumb economics and foisted upon the countries of Europe for political reasons. The idea that a one-size-fits-all monetary policy would work across a continent as diverse as Europe was always flawed. Europe is not America. It is divided by economics, geography, history and culture, and lacks all the ingredients that might compensate for these basic impediments - a single language, labour market mobility, a unified system of taxation and spending that can redistribute resources to poorer regions.

Europe's policymakers understood that. They knew very well that there has never been an example of a monetary union that has survived without political union. That's why the constitution was important. It was a further step on the road to the integration deemed necessary to make political union a reality, but the votes in France and the Netherlands have stopped that process in its tracks and, as a result, left the entire "project" in limbo.

The reality is that either monetary union is a staging post to political union or that a rejection of the next phase of integration starts a long process of unravelling.

Already, there is talk of which country will be the first to announce it has had quite enough of monetary union. Will it be Italy, already in recession and unable - as it did in the past - to devalue its way out of trouble? Will it be Germany, where the Bundesbank and finance ministry had to issue ferocious denials this week that they have been discussing the failure of the euro? Will it be France or the Netherlands? Who knows? What is certain is that the ostrich-like behaviour of Europe's policy elite hastens the fragmentation process. A success story? More like denial on a grand scale.