Tuesday, September 16, 2003

Sweden Rejects the Euro

What a surprise! And what I found even more surprising was the margin of victory - a huge 14.3%. I'd been expecting the pro-Euro camp to ride to victory on the back of the sympathy factor, what with all the press coverage that made Anne Lindh out to be the second coming of Mother Teresa, but it seems I underestimated the Swedes' ability to separate their feelings of grief from hard-headed calculations about the best choice for their country. In my defense, I can only say that the results of the 2000 election race between John Ashcroft and Mel Carnahan, in which Carnahan's death led to an election day surge for the dead candidate, and the taking of the Senatorial office by his wife, who was never even a participant in the electoral contest, was enough to make anyone doubt for the rationality of the average person.

None of the arguments made on behalf of joining the Euro made any sense, whether considered from an economic or a political angle. The claim that the Euro would bring big economic benefits was never plausible on its' face: the EU is very far from being an optimal currency area, and income flows on the scale that would be required to counterbalance any asymmetric shocks to Eurozone countries are simply politically unimaginable anytime in the near future. Labor mobility is extremely low, even within most European countries, while the linguistic barriers are such that the only direction in which labor could easily flow would be towards the UK and Ireland, because of the demands by employers in even the smallest countries that all employees speak the local language fluently. Can anyone reasonably imagine a day when the Danes, the Dutch or the Portuguese would agree to the adoption of German or (most likely) English as the official working language within their own borders?

But even leaving aside the language issue for the moment, there is still the fact that academic credentials are not automatically recognized or correctly evaluated outside of the countries they are issued, that legal and professional standards differ across all EU countries, that moving from one country to another often means losing all your pension contributions, and a host of other imperfections in the labor market that ensure Europe will not be looking like America, where moving from one coast to another is a routine matter, anytime soon.

For Sweden to have surrendered the Krona for the Euro would have meant the loss of the power to set its' own interest rates, in exchange for the dubious privilege of permitting the European Central Bank to set Europe-wide rates, in the calculations for which all of Sweden's 9 million inhabitants would have counted for less than the Paris metropolitan area (9.7 million) or the German region of Bavaria (12 million); to stretch the clichéd metaphor so beloved of EU politicians and bureaucrats, Sweden would have traded in a table all of its' own for the pleasure of being just one more pipsqueak voice at the Round Table where the Big Boys of France, Germany and Italy would get to call the shots - some deal!

Matters weren't helped by the flagrant disregard that France, that scourge of high-handed unilateralism and national self-interest, has displayed towards the strictures of the Growth and Stability Pact. France is not alone in being in breach of the pact's rules, with Germany once again playing the role of faithful sidekick in this little misadventure, but at least the Germans have had the decency to pay lip service to meeting its' terms, for fear of offending smaller countries like the Netherlands and Belgium that did their belt-tightening when it was needed. No, France, being France, does everything with typical Gallic insouciance and hauteur, with Prime Minister Raffarin supposedly proclaiming “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." What style, what elegance of language! Just the sort of flagrant violating of rules by one of Europe's "bigs" to get smaller players like Sweden convinced that theirs will be a voice to be respected within the Eurozone! Bravo, mes amis!

It was only to be expected that the EU bigwigs would come out with a bit of finger-wagging at the naughty Swedes who had failed to take their medicine as they'd been chided to, and indeed, Romano Prodi did not disappoint, muttering about how Sweden "would lose influence," as if there were ever any "influence" to be gained or maintained by surrendering all control of monetary policy to the European Central Bank. But, if Europe's political class are at all sensible, they would do well to draw the necessary conclusions from this poll, for despite the backing of nearly all of Sweden's parties, ranging across the entirety of the political spectrum, as well as all of the major Swedish newspapers and the entirety of the business class, and despite the pro-Euro campaigners outspending their opponents by the heftiest of margins, they still failed to cajole the Swedish populace into going along with their plans. What more proof could be required that there is something wrong with both the pace at which unification and centralization are occurring, and the manner in which they are being carried out?

If this weren't a Scandinavian country we were talking about, the political class would already be making arrangements for yet another poll within a year or two, with the aim in view of repeating the exercise ad nauseum until an "acceptable" result is obtained. Such was the case with Ireland and the Nice Treaty, and I certainly wouldn't put that sort of cynical politicking beyond Tony Blair, who still refuses to accept that the proposed European Constitution is worth putting before the public in a referendum. Fortunately for the Swedes, their political class tends to be a tad bit more respectful of the wishes of their masters than those of Britain or Continental Europe, and Goran Persson has given his word that there won't be another referendum for the next 10 years. This will make the job of British Europhiles exponentially more difficult, as the main, bogus, argument they've been able to muster has been that Britain could not afford to stay out of the Eurozone for fear of being "left behind", or not having "a seat at the table." It won't be possible to trot out nonsense about the British economy being too small to remain outside the Euro if tiny Sweden and Denmark, not to speak of little Switzerland, manage to prosper outside of its' borders.