Charlemagne: The Stockholm syndrome

Date: 20/09/03

Sweden's rejection of the euro spells danger for the European Union

SO WHERE does Sweden's refusal to join the euro leave the European Union? Three popular theories are doing the rounds. Call them “the inevitability of unity”, “the possibility of fracture” and the “the threat of catastrophe”.

Supporters of inevitability theory do not believe that the Swedish no raises any fundamental question about the drive for “ever closer union” in Europe. In a magnificently condescending phrase, Die Welt, a German newspaper, put the referendum result down to “a certain provincial eccentricity of Swedes”. A few Nordic weirdos, doubtless living in igloos inside the Arctic circle, will not halt the unstoppable momentum towards a united Europe. Indeed, a new European constitution, which EU governments next month will start negotiating about, should give the idea another big push. The “inevitabilists” point to history. In the past half-century, the EU has evolved from a modest coal-and-steel group of just six countries in 1952 to a union that, come next May, will number 25. There have been setbacks and crises before. But political and economic logic has driven the project forward, forcing many initially recalcitrant countries to join up. Don't worry about those Swedes and Brits, chortle the inevitabilists; even they will see sense in the end.

Others take Sweden's euro-rejection seriously and reckon that it might lead to the emergence of a “two-tier” or “multi-layered Europe”. Different countries within the Union will accept different degrees of integration. Most will adopt the single currency; the ten newcomers, due next year, must do so under the terms of their accession. But some countries may stay out for many years, perhaps forever. Meanwhile, the countries keenest on integration will forge ahead. For them, defence is the latest hot topic. Germany and France are determined to create an EU defence arm, with its own headquarters separate from NATO. The EU's more pro-American members, especially Britain and (soon) Poland, are against this idea. If disagreement persists, those keenest on a European defence union will go ahead on their own, with the inevitabilists predicting that recalcitrant countries will eventually see sense, and join up.

Believers in a multi-layered Europe are describing a pattern already visible: different EU countries already accept different degees of integration. And as the Union expands, its members are increasingly likely to have diverse needs and preferences.

But a two-tier Europe could throw up unexpected complications. Many of this model's enthusiasts reckon that the integrationists' natural “avant garde” is the EU's founding core of six: Belgium, France, Germany, Italy, Luxembourg and the Netherlands. It is certainly striking how all six are urging other EU countries to accept the draft European constitution now on the table without amendment. But the euro complicates efforts to form a hard-core Europe. Many promoters of ever closer union always believed that the single currency would both define and drive the EU's inner core. That was why some of them fought to keep countries like Greece and Italy out of the euro zone. But now there are 12 countries in it, and more to come. Is it really possible to have a closer defence and foreign-policy union which excludes some users of the single currency?

Even among the founding six, there are quite fundamental fractures. The Dutch and Italians are very wary of plans for a European defence union that might split NATO. And in the euro zone, the French and German governments have persistently violated the fiscal rules stipulating that no country can run a budget deficit bigger than 3% of GDP. The French prime minister's suggestion that his country's size and importance mean it should not be as constrained by such stability-pact rules as other euro-club members has particularly annoyed the Dutch, whose government is talking of taking France or the European Commission to court, to enforce the pact. The French are now changing their tone a little and insisting that they do take their responsibilities seriously. But the impression remains that France, while keen on ever closer union in theory, has failed to appreciate its practical implications.

Murmurs and mutterings

“Catastrophe theorists” are eagerly watching to see what happens. What will France's famously bellicose trade unions do, if their country has to cut public services to meet the euro area's fiscal rules? And if France keeps breaking them, will smaller countries revolt? Already many of them echo the words of Frits Bolkestein, the Dutch European commissioner: “Some countries in the euro zone seem more equal than others.”

Unlike Sweden, neither France nor the Netherlands ever held a referendum on adopting the euro. Indeed, the only two countries to have held polls on euro membership - Denmark and Sweden - both rejected the idea. Göran Persson, the Swedish prime minister, had a point when he said after his referendum defeat that even the German people might have said no to the euro, had they been consulted. Now that the euro has been created, there is little sign of popular rejection in the 12 countries that are using it. But that could change as the practical constraints of euro-membership sink in. At the least, the current dispute makes an unpromising background from which to launch a renewed drive for deeper European integration by means of a new constitution for the European Union.

At this point in the argument, the inevitabilists - inevitably - tell catastrophists to calm down. The EU, they intone, has always survived crises. Indeed, a crisis has often created the pressure for the next big leap forward. True enough. But it is also the case that Sweden's referendum has provided a timely reminder of another deep truth about European integration. It is an elite project, with very shallow popular support. As the European construction adds ever more floors and features, its shallow foundations may make it increasingly rickety.

Sweden's rejection of the euro spells danger for the European Union.