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Monday, August 22, 2011

Joining the Euro? Not in my lifetime

Last week we asked in passing when Swedish PM Frederik Reinfeldt would drop his support for Sweden joining the euro. Well, it turns out that he may not have to, as the main opposition party - the Social Democrats - have made that decision for him. Tommy Waidelich, formerly a pro-euro advocate in the 2003 referendum and current economic spokesperson for the Swedish Social Democrats, has made Swedish euro membership a distant dream (or nightmare).

In an interview with Europaportalen he clarifies his new position and that of his party, whose official line in the 2003 vote was also Yes to the euro. Waidelich says:
"[Swedish euro membership] is not on the agenda for the foreseeable future – during my lifetime, as long as I make the decisions."
Not in his lifetime? This is a clear shift, which probably means that the prospect of Sweden joining the euro has gone from lukewarm, to cold, to completely dead in the water. Swedish Finance Minister Anders Borg hasn't exactly been enthusiastic about euro membership either of late. In a recent interview, he said,
"In this type of crisis it is an advantage that the exchange rate and the krona can absorb part of the blow. This will help both the forestry industry and other sectors of the economy, as well as the job situation. It is clear that this is a big blow to the confidence of euro cooperation. I would still vote yes, but during the current circumstances it is an advantage for Sweden to be outside the euro.”
More widely, the development signals a triumph for the common sense of the Swedish people over the short-sightedness of the country's political elite on this particular issue (though there were several notable exceptions, and the centre-right govenrment in Sweden is generally very sensible on economic matters). In the 2003 referendum campaign, all the main parties apart from the tiny Greens and Left party, were in favour of Sweden joining, yet in the referendum, 55.9% of the electorate voted against, vs. 42% in favour. There were, of course, the usual scare stories about how Sweden would be sent back to the stone age and left isolated if it did not join (mixed with some more rational arguments relating to the removal of exchange rate risk for example - which are still valid). But the public's common sense - bondförnuftet - won the day.

With a 4.5% growth rate and lower borrowing costs than Germany, very few Swedes seem to have regrets - apart from a handful of politicians, and provincial leader writers for papers such as Göteborgs-Posten and Dagens Nyheter (the Japanese holdouts after World War II spring to mind- the soldiers, if you recall, who were found on various remote islands in the pacific decades later, still fighting, either unaware of, or unwilling to accept, that the war had ended).

In a recent opinion poll, 64% of Swedes said they would vote no the euro - with only 24% in favour. See the graph illustrating the recent surge in opposition to the euro (Click to enlarge. Nej=No, Ja=Yes, Vet ej=Don't know).

Game over in other words.

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