- The Washington Times - Wednesday, May 3, 2000


The euro is making some strange friends these days. Consider May 1 in Copenhagen, the workers' holiday still celebrated here with at least a show of conviction, flying red-hammer-and-sickle banners, marchers, wobbly renditions of the workers' anthem, and picnickers in the city parks. Sounding as though socialism had never been discredited, speakers vie with each other to demand solidarity with society's least fortunate.

But there was something else this week. Socialism here is struggling to find accommodation with the new economy, the Internet, globalization and the euro. It is startling indeed to find Finance Minister Mogens Lykketoft, who looks every bit as though he were separated from Trotsky at birth (no accidental resemblance surely), extol the virtues of the euro, the European currency. "Don't let anyone tell you there is a secret magical path back to the Denmark of the past," he thundered. The future, Europe, that's what it's all about.

On New Year's Day 1999, 11 of the 15 European member-states became the euro zone. Denmark, along with Great Britain and Sweden declined participation; Greece failed to qualify for the economic criteria. This spring, however, the leader of the Social Democrats, Prime Minister Poul Nyrup-Rasmussen, set a date for a Danish referendum on joining the euro to take place Sept. 22.

The outcome will be of importance not just to the 5 million Danes. It is also being watched with intense interest in Great Britain, where Prime Minister Tony Blair has been pondering the timing for a referendum of his own. It does not happen too often that you find television crews from the BBC covering the annual meeting of the executive council of the Danish Social Democrats, who over the weekend gave their blessing to the prime minister's push for a "yes" to the euro. The assumption is that as go the Danes, so go the rest. Which will in turn have an impact on the future of European integration, a project about which some mixed emotions continue to persist among ordinary Europeans across the continent.

If the Danes vote "no," it would not be the first time they set back the cause of European integration. Skeptical by nature, the Danes have always distrusted the motives of "those people down in Brussels." In 1992, they took everybody (including themselves) by surprise by voting against the Maastrict Treaty, causing a surge of doubts in other European countries as well. As fate would have it, the same year, the Danes won the European soccer championship, causing the foreign minister to quip, "If you can't join them, beat them." The following year, having negotiated opt-out clauses to four Maastrict treaty provisions considered too intrusive, the Danes voted again and came up with a paper-thin "yes" margin.

Now they may be at it again. A certain nervousness has characterized the government's campaign with good reason. Last week, a public opinion poll showed 46 percent in favor and 44 percent against, with 10 percent undecided. The political landscape resembles that of Britain and Germany to a degree. In favor are the ruling Social Democrats (though with some dissension in the ranks). So is the center-right, even if support is tepid to say the least. As the leader of the Conservative Party helpfully put it, "It won't be the end of the world if the Danes vote no." Adamantly opposed are the far left and the far right, particularly the anti-immigrant Danish People's Party, which on April 9 (the day Denmark was occupied by Nazi Germany in 1940) ran a campaign under the banner "for crown and fatherland," which has particularly gotten under the skin of the government.

While the pro-euro side, including the trade unions, argues in favor of economic development and jobs, the other side warns of loss of sovereignty and nationhood. Both accuse each other of scaremongering and the dirtiest campaign in human memory. Of particular concern for the government is the prospect of foreign interference, which could well backfire. Recently, Economics Minister Marianne Jelved begged members of the European Parliament to keep their views to themselves, remembering, no doubt, how the appearance of European Commissioner Jacques Delors on Danish television before the vote in 1992 sent opinion polls plummeting.

Watching all this, one might surmise that the sad spectacle of the still-declining euro is part of the reason for hesitation. Over the past 17 months, the euro has lost 22 percent of its value against the dollar. Rate hikes by the European Central Bank (ECB) have not made a dent in the decline. However, since the Danish currency is pegged to the euro anyway, the central bank in Copenhagen has little choice but to follow suit when the ECB moves; present monetary independence is a bit of an illusion. Last week's quarter-point rate hike in Frankfurt was followed in Copenhagen within a mere 11 minutes. What's more, the declining euro has been good for European exports, which have helped drive economic growth expected to exceed more than 3 percent this year.

Much more disturbing to the Danes is what happened to the Austrians recently when they chose a government considered disreputable by the rest. There may be little sympathy for the views of just-retired Freedom Party leader Joerg Haider, but the big brother attitude towards smaller countries displayed by the EU countries definitely rankles and could turn the Danish referendum against the euro in a surge of nationalism. The two issues simply cannot be separated. Ill-timed also was a set of taxation and social policy recommendations issued in late April from the European Commission and the ECB to the Danish government. Recommendations were actually perfectly sound, but in principle defied the contention that euro membership does not imply closer economic cooperation, which of course it does. That's the whole idea. Already monthly closed-door meetings between the 11 euro-zone finance ministers is causing the rest to feel left out of important decisions.

With a global trend towards dollarization or larger currencies, small currencies like the Danish crown will be left out in the cold if standing alone. Indeed those days are probably over. That does not mean that smaller countries will not have to guard their sovereign rights and veto powers jealously in the ECB and other institutions. It will not be an easy balance to find.

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