Vikings are meant to ravage Europe, not to save it,
but on September 14 Sweden's voters decisively rejected
the option of signing up for the euro. The Swedes' rejection
of that economic suicide note may have set in motion
a process that could save the continent from the worst
consequences of the EU's disastrous single currency.
To start with, Sweden's nej was a valuable reminder
to the electorates in the U.K. and Denmark (both of
which have yet to accept the euro) that there is nothing
inevitable about its introduction in their countries.
It was also a signal to those Eastern European states
that will join the EU next May that they too should
think very carefully before adopting a currency that
will almost certainly be unsuitable for their level
of economic development for many years to come. Most
important of all, if Brussels chooses to listen (early
signs are not, needless to say, encouraging), the Swedish
vote was a useful warning that the EU's current approach
may lead to political and financial disaster.
The "no" vote was a remarkable achievement.
The effort to persuade Swedes to just say "yes"
was backed by both the Social Democrats, for decades
Sweden's strongest political party (and currently the
dominant force in the country's governing coalition),
and by most parties on the center and center-right.
Additionally, the greater part of the business establishment
also supported the attempt to junk the krona. Cheered
on by large sections of the media, the "yes"
campaign was slick, lavish, and thoroughly disingenuous.
It is estimated to have cost five times as much as the
opposition's more-homespun approach. The "no"s
had few financial resources and even less, one would
think, in the way of obvious intellectual credibility
their most-visible backers were some dissident
Social Democrats and the Greens and other parties of
the far Left.
Despite that, they were comfortably ahead by the time
when, a few days before polling, Anna Lindh, Sweden's
foreign minister and the most-popular advocate of the
single currency, was murdered in a downtown Stockholm
store. The attack on Ms. Lindh was a crime that appalled
the nation, but if this tragedy (and none-too-subtle
attempts by the EU Commission to exploit it) persuaded
any Swedes to change their minds, it wasn't apparent
in the result. The euro was rejected by 56-42 percent,
a far-higher margin than had been expected.
Brussels responded with characteristic pique. Commission
president Romano Prodi talked darkly of the "influence"
that Sweden stood to lose within the EU, a comment that
would have had more force if Sweden had much influence
in the first place. Besides, there's something more
than a little obnoxious about an argument that says,
basically, join our gang or be beaten up. Typically
for Prodi, it's also misleading. The EU is currently
made up of 15 countries with a population of about 380
million. In May that total will increase to 25 countries
and some 450 million people. To suggest, even within
the context of the smaller group of countries that have
signed up for the euro, that Sweden (with a population
of only nine million) would have had much influence
is simply ludicrous. The management of the euro is having,
and will continue to have, a major impact on Europe's
economies. Sweden needs to fashion a response that is
in its own best interests. Exchanging the freedom to
do so for a few crumbs at the top table of the European
Central Bank makes no sense at all.
As to why the Swedes chose to reject the currency,
Prodi had an explanation that was, if it's possible,
even more obnoxious. Fear of the new, he sneered, was
to blame, a claim difficult to reconcile with the fact
that opposition to the euro was strongest among the
The truth was rather different. Savvier than their
government gave them credit for, many Swedes had realized
that the euro is as much a political as an economic
project. That's true already (how can a transfer of
monetary and interest-rate policy to a pooled central
bank not be?), but it is likely to become even more
so in the future.
This is because the euro is a currency that was introduced
too fast, too far, and too soon. To understand why,
it's necessary to look no further than the EU's ruling
class, a caste that sees the world as it thinks it should
be, not as it is. This, after all, is a bureaucracy
that has attempted to regulate the curve of the humble
banana (yes, really). Economies, however, are rather
more complex than fruit. As the EU prepared to launch
its currency, it was decreed that only those countries
that had "converged" economically would be
eligible to enroll for the euro. Miraculously, all eleven
applicants (Greece came later) were found to have passed
the test. Phew! But this convergence was bogus, created
by statistical sleight of hand that would have embarrassed
even Enron. Worse, it was always going to be meaningless.
National economies evolve over time. The EU's reliance
on a snapshot of the statistical data on a particular
date was never going to give the true picture. It never
The mess that has followed was utterly predictable.
A one-size-fits-all money has been imposed on some very
divergent economies. Obliged to consider the euro zone
as a whole (and, one suspects, to help establish the
credibility of the new currency), the European Central
Bank has kept interest rates far higher than, say, conditions
in Germany alone would justify, something that has compounded
that country's economic misery. Rubbing salt into German
wounds, under the rules of the "growth and stability
pact" that supposedly underpin the euro, Germany
is obliged to reduce its budget deficit, dumb policy
in a near-deflationary ex-growth economy.
Germany, and now France, seem ready to ignore these
limits, a sensible-enough stance given their respective
national situations, but tough luck on all those smaller
countries that had been bullied into recession in the
interests of what they foolishly believed to be a common
currency. The French prime minister recently explained
the situation with splendidly Napoleonic directness,
"my first duty is employment and not to solve accounting
equations and do mathematical problems until some office
or other in some country or other is satisfied."
Some office? Some country or other? So much for the
smaller countries' "influence."
There are two likely solutions. Either a more general
breakdown in budgetary discipline will be accepted (in
which case the euro will weaken or have to be propped
up by higher interest rates) or there will need to be
a transfer of substantial taxing and spending authority
the meat and drink of daily politics away
from the EU's member states to its center, so that Brussels
can smooth out the local dislocations caused by a pan-European
currency. Logical enough, except that that will be the
point when the EU will finally be fully federal in everything
but name and, ahem, democratic legitimacy.
And to Swedes, this matters. With the possible exception
of some of ABBA's less-successful costumes, Sweden has
far less to be ashamed of in its past than quite a number
of the EU's member states. As a result many Swedes retain
far more nationalistic pride, politely understated,
of course, than is acceptable in some of Europe's grubbier
spots. Add to that a long and active democratic
tradition and it's easy to see why it was worries over
the loss of sovereignty and democratic control that
weighed heaviest with the "anti"s. Even the
fears that the nation's generous and absurdly
expensive social-security system would be endangered
by the euro (another important reason for the "no"
vote) have to be understood in this context. Misguided
they may be, but to many Swedes, their fiercely egalitarian
welfare state, folkhemmet ("the people's home"),
is about more than economics. It's something that helps
define them as a people. Any perceived threat to it
was a sensitive issue in a vote that was, at its heart,
all about national identity.
Ironically, these fears were inflamed by the very nature
of the "yes" campaign. The argument that adopting
the euro was essential for Sweden's international competitiveness
was code, many Swedes thought, for the destruction of
the Swedish welfare state. It was also somewhat difficult
to square with the fact that Sweden is currently competing
rather well. Sweden's economy is growing notably faster
than those countries unlucky enough to be stuck in the
euro zone, its unemployment is far lower and, in marked
contrast to the shambles in France and Germany, its
budget is in surplus. Under these circumstances, it's
no surprise that, four days after the vote, the krona
had risen to a ten month high against Prodi's funny
Adding further to the irony, all the cash spent by
the ja heads actually worked against them slick,
lavish, and patronizing, their propaganda was a typical
product of Europe's big business, big bureaucratic elites,
hardly something likely to appeal to voters looking
to retain some shreds of sovereignty in an EU widely
and correctly seen as being imposed on
them from above. And appeal it didn't. The final tally
showed a significant swing against the euro when compared
with polls taken only six months before.
Ultimately Göran Persson saw the fix he was in.
As disaster loomed, he spent the later part of the campaign
claiming that the single currency would both stimulate
the country's economy and bolster the welfare system.
Later still he began hinting that "yes" would
really mean "later." When, unsurprisingly
enough, these efforts failed to convince anyone, the
poor man then resorted to an argument of the truly desperate.
Seemingly unaware of the fact that it's been a while
since the panzers last rolled, he took to mumbling about
the need for "peace" in Europe. This was too
much for Mats Qviberg, one of Sweden's most-prominent
financiers. Persson's reminiscences of a "weeping"
Helmut Kohl saying he did not want his sons to die in
a third world war were not, quipped Qviberg, an argument
for Sweden to sign up for the euro.
Indeed, but it's difficult to see what was.