Charles Krause reports from Canada on the effect last fall's referendum on Quebec separation has had on the economy of Montreal and on the psyche of it's minority population.

CHARLES KRAUSE: Montreal was once Canada's undisputed cultural and financial capital. It was a world class city, where anglo-Quebecers dominated business and commerce, while French Quebecers gave the city a European style and elan unique to North America. (music)

Montreal still has a rich cultural life: four major universities, a first-rate symphony orchestra, and community centers where free concerts are offered almost every night of the week. (applause)

But despite appearances, Montreal is a city in steep decline. Over the past 20 years, dozens of corporate headquarters have left for English-speaking Canada. Even the Bank of Montreal is now headquartered in Toronto. The exodus has left downtown Montreal filled with half-empty buildings. There are also boarded up theaters and shops, some for sale, some for rent, clear signs of a city in crisis.

Unemployment is higher than any other large city in Canada. Fully 10 percent of Montreal's nearly 2 million people have no jobs. Many are forced to take their meals at glorified soup kitchens like this one, called Restopop, located in the basement of a church. Montreal's economic crisis didn't begin with last fall's referendum. But the tension and economic uncertainty that resulted from the referendum have clearly aggravated the city's downward spiral. Radio talk show host Albert Nerenberg.

ALBERT NERENBERG, Radio Talk Show Host: There's a sense of--an enormous sense of crisis, when you have half the population saying that they're planning to leave, you have the other--a big part of the population saying it's time to stand up and fight. People are getting pretty extreme, and, and I would say very, very emotional, and their feelings are strong.

UNIDENTIFIED CALLER: We feel spiteful. We feel we're not being heard. We feel that we're being sold down.

CHARLES KRAUSE: Nerenberg's mid-day radio talk show reflects the anxieties of Montreal's once-powerful English-speaking minority.

UNIDENTIFIED CALLER: It's like you've got something eating away at the country's foundation and it took everybody by surprise. This is how I would explain it. That's the angst.

ALBERT NERNENBERG: Yeah.

UNIDENTIFIED CALLER: All right?

ALBERT NERNENBERG: That's very well put.

CHARLES KRAUSE: Their collective trauma even has a name. It's called Anglo angst.

CALLER: We need to make a decision now and work together either as Quebec or as Canada. We need to get this thing done with.

CHARLES KRAUSE: Last fall's referendum was meant to settle once and for all whether Quebec would become independent or remain a part of Canada.

(WOMAN SINGING IN FRENCH)

CHARLES KRAUSE: The separatists lost, but the vote settled nothing because the result was so close that Quebec separatist leaders have said there'll be another referendum.

ALBERT NERNENBERG: The horrible irony was that we all got the thing that we didn't want, which is that we got the most indecisive vote possible, so we're all cursed with this indecision and uncertainty. The one thing we didn't want was uncertainty, and that's what we got. You can't go on with your life. You're living in limbo.

CHARLES KRAUSE: Much of the resentment among anglos is a result of Quebec's strict language laws which forbid exterior signs in English. Most businesses comply but some don't. The resentment is most evident in Westmount. Overlooking downtown Montreal, it's an enclave where many of the city's wealthy anglo families have lived for generations. But since the separatists' near victory last October, hundreds of homes in Westmount have gone up for sale. Nearly every street has a family packing its belongings, preparing to leave for English-speaking Canada or the United States. Nicholas Lomasney is a banker, and his wife, Wendy O'Donnell, is an office administrator. Like many others, they've decided to move to Toronto.

WENDY O'DONNELL: We want to leave because of economic problems here, because of the decline of Montreal, and we do not see that there's really a great future for us here anymore. And we're also really tired of the political uncertainties.

NICHOLAS LOMASNEY: We want to see what else is out there, outside of, outside of Montreal, and, uh, and, uh, not have to worry about this all the time, because it's a monkey on our backs.

WENDY O'DONNELL: It's just, it's irritating, you know that. I mean, we're both fluently bilingual. Nicholas speaks four languages. I speak French and English and you just, it's--you get tired of it, you know. It's constantly there, and Bouchard is planning another referendum, and it's just like everybody is just saying, enough already.

CHARLES KRAUSE: Quebec separatist Premier Lucien Bouchard has attempted to reassure anglo Quebecers as well as the city's business community, but the hemorrhaging continues. Since the referendum, several major corporations have announced plans to either move their headquarters from Montreal or cancel significant investments due to the continuing talk of yet another referendum. One of those companies is Jack Spratt, a leading clothing manufacturing which had planned to expand its operations here on this vacant lot. Owner Jack Kivenko.

JACK KIVENKO, Clothing Manufacturer: There is no way that we're going to take our hard-earned money and invest it in real estate in Montreal, when the real estate may have very little value two years from now, three years from now.

CHARLES KRAUSE: Kivenko says he's cancelled all future investment in this business because if Quebec separates from Canada, he expects his customers to boycott the jeans he makes here in Quebec.

JACK KIVENKO: They've made very clear to me that the moment Quebec separates that any orders that are outstanding will be cancelled and that we don't need to show them our, our product line, they're not interested. They'll buy the products from other parts of Canada, from the United States, from Mexico, or anywhere else. Remember that the free trade agree that Canada has with the United States and Mexico is between Canada, the United States, and Mexico, and our access is threatened by any move to secede from Canada.

CHARLES KRAUSE: The growing uncertainty has also spread to Montreal's poor but no less vibrant ethnic communities. They too feel threatened. Already their children are forced to go to French-language schools, and they worry about even more restrictive policies if Quebec becomes independent. As a result, they too have begun to leave Montreal for other parts of Canada, hurting the many small businessmen who remain. Puymong Sir started his corner grocery store from nothing when he arrived in Montreal from Cambodia 15 years ago. The future looked bright, he says, until the referendum campaign began last year.

PUYMONG SIR, Small Businessman: Business is very slow. Every day it's the same. Economy is slow, so a lot of people move from, uh, Montreal here, I mean, Quebec to somewhere else, like some of them, they move to Vancouver and some of them, more of them, they move to Toronto.

CHARLES KRAUSE: Mohsen Anvari is an immigrant from Iran who's now dean of the business school at Montreal's Concordia University. He says that what many ethnics in Montreal fear is that if Quebec becomes independent, they'll become second-class citizens.

MOHSEN ANVARI, Concordia University: They've come here to a multicultural city, a window to the world, a forward-looking environment, and all of a sudden, they fear that it is becoming xenophobic. They're thinking that it's becoming inward-looking, and would exclude them.

CHARLES KRAUSE: Since the referendum, Quebec's separatist government has appointed Serge Menard to a new post, minister for Montreal. It's the government's way of recognizing that there's a problem. Part of Menard's job is to reassure Montrealers of all backgrounds that they have nothing to fear, that they should remain in Montreal and invest here.

SERGE MENARD, Minister for Montreal: We had referendums on very divisive questions, without having one single brawl, so everything is going to be made peaceful here. We will remember what rights we have to give to the, uh, to our minorities, and we'll be respectful of them.

CHARLES KRAUSE: As minister for Montreal, Menard maintains a full schedule of public appearances meant to emphasize what's positive about Montreal and the shared experiences that bring Montrealers together. But anglos and Montreal's ethnics aren't buying the message.

MOHSEN ANVARI: It's not very reassuring. I don't know how to convey the sense of this to you, but I think that when people feel that they are going to be excluded and they're not going to be treated like everybody else, they tend to avoid bringing about situations where that can happen.

CHARLES KRAUSE: Perhaps the clearest sign of the growing polarization and bitterness that have resulted from the referendum is growing support for what's called partition, the break-up of Quebec into ethnic and linguistic enclaves. The idea is that non-French-speaking parts of the province, like Westmount, would separate from Quebec if Quebec separates from Canada. McGill University Law Professor Stephen Scott is a leading proponent of partition. He cites a recent poll which found that fully 60 percent of Quebec's non-French-speaking population now favors partition if Quebec separates from Canada.

STEPHEN SCOTT, McGill University: Most anglo Quebecers, most federalists, accepted, in my view, and have understood throughout that if Canada is divisible, so is Quebec. What's sauce for the goose is sauce for the gander, and I simply say that the government of Canada then says to Quebec we are going to remove, we will allow you independence, but only on the basis that the North, the West, and the South of the province remain part of Canada.

CHARLES KRAUSE: But wouldn't this idea of partition lead to the kind of violence that we've seen in Beirut and Sarajevo and other places around the world?

STEPHEN SCOTT: We don't propose violence. The state has the right to defend itself, and no one is obliged to submit to the revolutionary overthrow of the state.

CHARLES KRAUSE: But separatists say partition is a malicious idea designed to undermine support for the separatist cause by raising the specter of violence between those loyal to Canada and those loyal to Quebec. Serge Menard.

SERGE MENARD: Partition is an idea that's made to, to make people fear of civil war because on certain boundaries, that's what it means in history. You must hate Montreal if you're for a partition because, uh, that could kill Montreal economically.

CHARLES KRAUSE: But still, lines are being drawn and viewed from almost any angle, Montreal is today a fractured city. Quebec's separatist government thinks it can repair the city's economy without sacrificing its dream of independence, but most others believe that as long as there's tension and political uncertainty, Montreal's tragic decline will be nearly impossible to reverse.