Sweden and the euro: Why they said no

Date: 20/09/03

The reasons usually given for Swedes' reluctance to adopt the euro are probably wrong. The real ones are more to do with politics than economics

IF EVER there was a vote that could have been blown off course by a chance event, it was Sweden's referendum on joining the euro. Just three days before the poll, Anna Lindh, the country's popular and charismatic foreign minister, was stabbed to death in a Stockholm department store. Since she had also been the euro-campaigners' standard-bearer, many expected a late surge of sympathy in favour of a yes. After the murder, for the first time in months, a couple of opinion polls showed the yes camp ahead or level. But the Swedes were not to be emotionally swayed. On September 14th, they voted decisively against joining: 56% said no; 42%, yes. Along with Britain and Denmark, Sweden will continue to stand aside from the European Union's 12 other countries that have abandoned their old currencies.

It has often been argued in Brussels that the Swedes' aversion to the euro has been driven mainly by a general hostility to the EU, by an unfocused sense that their welfare state is threatened by the EU, and by a broad resistance to change, especially among older people. The evidence, however, suggests other reasons.

Voters in the 18-30 bracket voted more heavily against joining the euro than any other age group. The same exit polls that accurately predicted a no to the euro also showed that 60% of voters want Sweden to remain in the EU. Indeed, sentiment towards the Union has actually warmed since Sweden first voted to join in 1994. Asked to list the issues that had mattered most, the antis put the welfare state only fourth. Their two biggest worries were about democracy and sovereignty; national control of interest rates came third.

Swedish voters may have taken note of the voices in Berlin, Paris and Brussels that have long extolled monetary union as a “political project” - a crucial step on the road to political union in Europe. The yes campaign tried to counter concerns about sovereignty with arguments about influence. The leaders of all the biggest parties and of most of Sweden's largest companies argued that the country risked being marginalised in the EU if it shunned the euro. Such arguments resonated with diplomats, international businessmen and the wealthy (Stockholm's richest suburb voted 75% in favour) but did not impress ordinary people, who may wonder how much influence a country of 9m can have in a Union soon to number 450m.

Göran Persson's Social Democratic government had tried other arguments. Fairly late in the campaign, Mr Persson began to argue that the euro helps secure peace in Europe. Many yes voters cited this argument in explaining their choice. But the issue of peace cuts less ice in pacific Sweden, which has fought no war for almost 200 years, than in France or Germany.

The yes campaigners tried, above all, to focus the debate on the economy. But in the event, exit polls suggest that economic issues mattered less than expected. When Sweden voted to join the EU in 1994, its economy was in big trouble. But this year Sweden is forecast to grow at 1.5% against 0.5% for the euro area; Swedish unemployment is at 5.4% compared with 8.9% in the single-currency zone. And the euro area is in a mess over its efforts to enforce fiscal discipline on countries using the single currency.

Mr Persson is probably safe as prime minister. Though in the referendum's aftermath he spoke wistfully of becoming a priest or a forest worker, he seems (on mature reflection) to have decided that he will soldier on as head of government. His most obvious successor, Mrs Lindh, is no longer around. And Mr Persson's dignified handling of her death seems to have deflected much of the criticism of him over the conduct of the referendum.

They've heard it all before

Sweden's foreign-policy establishment, however, is in a stew. It fears that Sweden will now be on the defensive in the negotiations that will begin next month over a constitution for the EU. Without Mrs Lindh, a less experienced minister will have to handle them. And the government is bracing itself to resist demands for a referendum on any new EU constitution too.

Big business is also taken aback. Companies like Ericsson have given warning that, in the long run, foreign investment in Sweden will dip. And some economists fear that the country may forgo a boom in trade within the euro zone. Swedish voters, however, heard all these arguments before the referendum and were plainly unimpressed. As one voter in the far north told Swedish television on election night, “It's too soon to make a decision. Come back in 20 years and ask me again.”