| Author (Person) | Bower, Helen | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Publisher | ProQuest Information and Learning | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 2.12.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 02/12/2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Less than a year after Europeans in eleven EU Member States began spending euro notes and coins the Swedish government announced that it will give its citizens the choice of switching to the European single currency in a referendum on the issue to be held on 14 September 2003. The announcement by the Swedish government on 29 November 2002 follows much media speculation that a referendum date would be set after the Social Democratic Party claimed a comfortable victory in the national parliamentary elections on 15 September 2002. Yet the decision to hold a euro referendum follows swiftly on the publication of an opinion poll on 28 November 2002 that suggested support for the euro in Sweden is hanging in the balance with 43% saying they would support the euro, 43% against it and 14% undecided. The Swedish government and the other political parties in support off joining the currency have just under 10 months to convince that 14% that membership of the single currency would be a good thing for Sweden. Background to Economic and Monetary Union Economic and monetary union is widely recognised to have been the most ambitious of the European Union's objectives since the organisation's beginnings in the 1950s even though it did not become an explicit goal until a meeting of the then six Member States at the Hague in 1969. At the meeting, 1980 was set as a target date but the adverse economic circumstances of the early 1970s resulted in little being achieved until the idea of EMU was relaunched by Roy Jenkins as President of the European Commission in 1977. Specific reference was made to the idea in the Single European Act in 1986 but real progress was not made until work began on what was to become known as the Delors report in 1988. This report led to a decision to convene an Intergovernmental Conference (IGC) on EMU, the conclusions of which were a key component of the Maastricht Treaty. Economic and monetary union was to be achieved through three key stages with the final stage laid out clearly in the Maastricht Treaty. The first stage began on 1 July 1990 - before the treaty - and included the abolition of remaining capital controls between Member States. This was followed by stage two, which began on 1 January 1994 and established the European Monetary Institute, which was given the task of preparing for the third stage of EMU. This stage began on 1 January 1999 when the European System of Central Banks, comprised of national central banks and the European Central Bank took over the responsibility for monetary policy. The process was completed on 1 Jnauary 2002 when euro notes and coins became legal tender across the eurozone. More information on the European Union's Economic and Monetary policy can be found in the following sources within European Sources Online:
The European Commission SCADplus site also provides a good overview. Initially eleven Member States participated in the third stage of EMU that began on 1 January 1999 but these were joined by Greece in 2001 after the country was deemed to have met the necessary convergence criteria. Three Member States have not adopted the single currency: Denmark, Sweden, and the United Kingdom. Sweden and EMU Moves towards Economic and Monetary Union were already well underway when Sweden became a member of the European Union in 1995. At the time of joining, feelings about the EU among the Swedish population were mixed following only a small margin of victory in the 1994 national referendum that led to EU membership and anti-EU sentiments continued to exist in the years that followed. In 1996, the Swedish Government presented a report entitled "EMU - A Swedish Perspective" which been prepared by a specially commissioned team of experts led by Lars Calmfors, Professor of International Economics at Stockholm University. The report highlighted a number of economic and political arguments for and against joining the euro. From the economic perspective, the report concluded that there would be benefits at the microeconomic level from joining the euro but this had to be weighed against the significant drawback that the national government would not be able to adapt its monetary policy to the economic situation in Sweden at any given time. The report suggested that this would cause serious problems if Sweden's economy was to move out of step with other European economies. The political arguments for joining the euro were stronger the report suggested - since Sweden had only recently joined the European Union a decision to stay outside EMU would weaken its position in the EU and it would lose influence in other areas. The Commission suggested that Swedes would bee seen as "unwilling Europeans". The report concluded that the economic arguments did not favour participation in the single currency whilst the political arguments did. However, bearing in mind the current economic situation, the Commission concluded that the economic arguments were more important and the political case for joining would not be so important since the Commission believed that several other countries would remain outside EMU initially. One analyst has described the Commission's recommendations as "yes, but later". In the public debate that followed the presentation of the report business organisations, including the Federation of Swedish farmers and the Swedish Confederation of Professional Associations, expressed their support for joining the single currency mainly because of the reduced costs and more effective competition in Europe. The Swedish Employers' Confederation (SAF) argued that imbalances in the Swedish economy were a result of national economic policy and that any decision to remain outside of EMU based on unlikely disturbances would be "absurd". However, the Swedish Trade Union Confederation argued that the key arguments against joining EMU outweighed the positives in the short term. In particular, Sweden's economy was not yet ready for joining and a significant reshaping of wage formation would be necessary before it was. In addition , it argued that the issue need a longer and wide debate to ensure that it had support from the electorate. Ultimately, it seems to have been this question of public endorsement and legitimacy that led the Swedish Parliament, the Riksdag, to vote in favour of a bill rejecting Swedish participation in EMU at that stage when it voted in December 1997. The bill stated:
The move reflected the fact that many Swedes were comparatively sceptical about the number of decisions which were being taken at European level and were not yet ready to give up more of their national sovereignty. In the midst of such public opinion, the Social Democratic government realised that to seek parliamentary approval would have been a risky option with the party itself divided over the issue and facing significant opposition from the parties of the Centre, the Left and the Greens. Five years on: Time for a national referendum? Five years on from the Riksdag's decision, the euro is now in daily use across twelve of the Member States and the issue is once again nearing the top of the Swedish Government's agenda. Whilst the Swedish Commission report suggested that the political argument for joining for fear of losing influence in the EU would not be so much of a problem because several other EU countries would not participate in EMU this has not proved to be the case. Sweden is only one of three EU Member States to have "opted out" of EMU and whilst the others - Denmark and the United Kingdom - have been formally granted the right to remain outside EMU, Sweden has not. With 80% of the EU's Member States now part of the eurozone, the political arguments for joining and therefore benefiting from a stronger influence in EU affairs are even stronger than they were in the late 1990s. However the economic perspective is not so clear cut. Although many analysts believed the euro would be a stable currency its value has fluctuated a good deal. In addition, the economies of eurozone countries do not appear to be moving in step with inflation in most EU Member States running at 2% but over 4% in the Netherlands, Portugal and Ireland. Yet at the same time Sweden's economy is also faring better than it did in the 1990s and interest rates in Sweden are now at roughly the same level as those countries participating in EMU. In such an environment, the Swedish Government with the backing of the main opposition party, the Moderates, declared on 29 November 2002 that the decision of whether the time is now right for Sweden to join EMU will be put to the people in a referendum in September 2003. The decision follows a comfortable victory for the Social Democratic Party in the However, there is still strong opposition to Sweden joining the single currency. Within parliament, the Lefts and the Greens who normally support the Social Democrats are strongly opposed to participation in EMU and public support also hangs in the balance. Results from an opinion poll carried out by Demoskop, which were published on 28 November 2002, suggest that support for the euro is declining. Acting on the request of the Deutsche Bank, Demosop conducted more than 9,000 telephone interviews between 8-24 November 2002. The results show that if the election was to take place today, 43 percent would vote yes and 43 percent would vote no to a membership in the EMU, whereas 14 are undecided. This result follows relatively stable opinion about the euro during the past year when the yes-side has continuously been in the majority. Goran Persson, the Swedish leader, is well aware that winning the referendum is going to be an uphill struggle and he has himself predicted that the result is probably going to be something close like 53-47 - one way or the other. The Social Democrats will have to convince large sectors, like the trade unions of which 57% are currently against the euro, that both the political and economic arguments in favour of EMU participation now outweigh the other factors. Yet even if the Social Democrats and the Moderates can obtain a "YES" vote in September's referendum, Sweden will not automatically be able to join the single currency. As Pedro Solbes, the European Commissioner responsible for the EU's economic and financial affairs, said after the referendum was announced "Sweden still has some way to go". Sweden has been assessed by the European Commission annually for the last three years to decide whether it meets the criteria for membership that were set out in the Maastricht Treaty but it has failed on each occasion. Whilst its government finances, inflation and interest rates meet the criteria it is the stability of its own currency that is questioned. The Treaty says that countries must demonstrate two years of exchange rate stability, although the exact meaning of that is unclear the European Commission interprets it as countries must be in the Exchange Rate Mechanism. Whilst Sweden is not yet in the ERM, Mr Persson has said that he would take Sweden in soon after a "YES" vote in the referendum. In addition, changes would also be need to the laws governing Sweden's central bank, the Riksbank, in order to make it independent. In such a climate with so many factors coming into play, the announcement of a referendum is by no means a guarantee of Sweden's participation in EMU. However, if Sweden does become the next member of the eurozone then it will leave Denmark and the United Kingdom even more isolated as the only two remaining "opt-outs". Further information within European Sources Online:
Further information can be seen in these external links: EU Institutions News Organisations
Helen Bower The Swedish government has announced that it will give its citizens the choice of switching to the European single currency in a referendum on the issue to be held on 14 September 2003. |
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| Subject Categories | Economic and Financial Affairs | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Countries / Regions | Sweden | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
