A poll by Sifo, released last Friday, showed that 49%
of Swedish voters want to keep the krona (crown) and only
34% are happy to see it disappear. On Monday, Gallup announced
similar results. The no campaign has been
gaining momentum since the end of last year, feeding on
fears that the euro will bring price hikes and welfare
cuts. On Saturday, Goran Persson, Swedens prime
minister, moved to allay both concerns. A price and competition
commission would be created, he said, to make sure Swedens
retailers did not take advantage of the new currency to
raise prices or round them up. Mr Persson also cut a deal
with the LO, Swedens main confederation of blue-collar
trade unions, agreeing a new fiscal framework that would
reconcile Swedens generous social contract with
the euro areas restrictive stability pact.
Sweden's Riksbank publishes speeches and press releases.
The Treasury sets out the five economic tests for Britain's
entry to the euro. See also Britain in Europe, a pro-euro
organisation. The Bank of England and the European Central
Bank post their often-differing policy decisions. The
European Commission provides information on economic and
financial affairs, including the stability and growth
pact, and publishes euro-area statistics.
Swedes are whole-hearted internationalists but, as Swedish
economist Lars Calmfors puts it, they are half-hearted
and unreliable Europeans. Sweden joined the European
Union less than a decade ago and has stayed out of the
euro until nownot by negotiating a formal opt-out,
as Britain did, but by deliberately missing the Maastricht
treatys entry criteria year after year. Still, many
thought that Sweden would warm to the euro once it was
in circulation. Around 40% of Swedens trade is with
the euro area; 80% of Swedens larger corporations
already invoice in euros, according to one recent survey,
and another found that 80% of small businesses think the
euro would be good for them. Once euro notes and coins
were changing hands and lining pockets all over the continent,
many expected ordinary Swedes to take to the new currency
quite naturally. In Denmark, for example, the euro is
already widely accepted in shops and restaurants, even
though Denmark is not itself a member.
Instead, familiarity has bred contempt. Swedes have listened
to reports from Germany, Italy and Greece of surreptitious
price hikes inflicted on consumers unfamiliar with the
new currency. They have watched the economies of the euro
area grow just 2.2% per year since its birth, compared
with 3% in Sweden. Germany provides an oft-recounted cautionary
tale. It entered the euro at too strong a rate and is
now enduring the painful process of growing (or shrinking)
into a one-size-fits-all monetary policy. Swedens
krona, which is currently trading at over 9.2 to the euro,
will have to strengthen substantially before it is absorbed
into the single currency.
Swedes are also reflecting upon the lessons of their
own history. They have had a fixed exchange rate for about
70 of the past 100 years, but not all of those years were
happy. Many associate the fixed regimes of the 1970s and
1980s, for example, with stagflation and unsustainable
budget deficits. In more recent years the Riksbank, Swedens
central bank, has arrived at a successful monetary policy
based on targeting inflation and floating the currency.
The weakening of the krona in 2001, for example, helped
to cushion the Swedish economy from the effects of the
global downturn. Inflation has remained stable and interest
rates on Swedish and German bonds have converged. Indeed,
Sweden, like Britain, has largely shrugged off its envy
of Germanys Bundesbank. It now dares to think that
its monetary-policy framework is rather better than that
of the European Central Bank (ECB). According to Lars
Svensson, a Swedish economist at Princeton University,
When it comes to monetary policy, the monetary union
needs Sweden and the UK, not the other way around.
Mr Perssons own minister for trade and industry,
Leif Pagrotsky, thinks the euro might disturb Swedens
compact against inflation. Over the past ten years, the
Riksbank has won its battle with Swedens unions,
convincing them that excessive wage claims would only
invite higher interest rates. As a result, unions trim
their claims to fit the Riksbanks 2% inflation target.
Would they do the same for the ECB? Sweden would account
for just 3% of the euro-area economy, Mr Pagrotsky points
out. The ECB would pay little heed to wage pressures emanating
from such a distant corner of its domain, so why should
Swedish workers pay any heed to the ECB? Sweden might
go the way of Ireland, not Germany: euro-area interest
rates might be too low for it, not too high, and inflation
Euro-sceptics in Sweden, like those in Britain, are even
more afraid of a common fiscal policy than they are of
a single monetary policy
If it is true that Swedish workers would get away with
more under the ECB than under the Riksbank, no one seems
to have told the unions. The LO refuses to campaign in
favour of the euro and many of its constituent unions
are actively against.
In truth, euro-sceptics in Sweden, like those in Britain,
are even more afraid of a common fiscal policy than they
are of a single monetary policy. In Sweden, unlike Britain,
however, they fear that taxes and spending will be harmonised
downwards, rather than upwards. This is the issue that
has split the ruling Social Democrats and roused the misgivings
of the unions. The furore seems a little premature. The
stability pact, the euro areas fiscal straitjacket,
is already coming apart at the seams. Besides, the pact
is supposed to rule out big deficits, not big government:
member states are free to spend a lot provided they also
tax a lot. Mr Persson is still hoping to make this clear.
The fiscal framework he unveiled at the weekend would
aim for large enough surpluses in economic upswings to
leave room, within the stability pacts 3% deficit
limit, for generous welfare benefits and active labour-market
policies in downturns.
Some euro watchers say that if Britain joined the euro,
Sweden would follow. The converse is probably not true.
But if Sweden rejected the single currency, it might have
a substantial impact across the North Sea. A no
vote would show that the euro has lost rather than won
converts in its first 18 months as a physical currency.
More significantly perhaps, Swedens referendum campaign
would demonstrate to Britons that it is not only right-wing
xenophobes who oppose the single currency. Far from it.
In Sweden, the most implacable euro-sceptics are the former
communists and the greens. Soren Wibe, the de facto leader
of the no campaign, is a Social Democrat.
The English have already recruited a Swede to restore
pride to one cherished national institutionthe English
football team. Might the Swedes now help in the ongoing
campaign to save anotherthe pound?