- The Washington Times - Monday, September 15, 2003

FRANKFURT, Germany (AP) — Sweden’s “no” to the euro dents the prestige of Europe’s shared currency, already tarnished by powerhouses Germany and France ignoring rules on government spending and the public perception that the euro caused prices to rise.

Euro opponents in Britain and Denmark — the two other European Union members not using the currency — took courage from Sunday’s vote, which comes as the monetary union struggles to overcome slow growth and lingering public rancor over inflation blamed on the new money.

The immediate impact of the vote on the existing union is slight, as Sweden would have increased the size of the euro economy by only 3.6 percent. But the refusal by a trade-dependent nation with strong public finances — exactly the kind of country the euro’s founders envisioned as ideal for the currency — was seen by many as a snub for the 4-year-old euro.

Coming after Denmark’s 2000 vote against the euro and Britain’s decision this year to postpone any referendum, it also sends a cautionary signal to the Eastern European countries slated to be admitted to the EU next year. The 10 eventually will have to decide whether to try to meet the strict economic criteria for joining the euro, or to keep their own currency.



Michael Howard, speaking for Britain’s opposition Conservative Party, said yesterday that Sweden’s decision indicates that the euro was a “dead duck” in Britain. Even a euro supporter such as former Europe Minister Keith Vaz, a Labor Party member, called Sweden’s 56-42 percent rejection “a bitter blow to the pro-euro campaign in Britain.”

At the center of the tension among the 12 euro countries are budget deficits run up by France and Germany, above the agreed-upon 3 percent of gross national product limit — limits imposed to keep profligate state spending from boosting inflation and undermining the new currency.

Smaller countries have voiced dismay that they took painful steps to control their spending in order to join the euro, only to see their bigger neighbors take a relaxed view. The Netherlands’ finance minister has even threatened to sue the European Union to enforce the rules.

Violators can face heavy fines — but officials have instead begun floating ideas to loosen the rules.

“Getting large governments to stick to the rules they at one time subscribed to — that’s the issue,” said economist Julian von Landesberger at HVB Group in Munich.

With apparently one rule book for big countries and another for small ones, Swedes feared being forced to cut government spending on their politically popular welfare state, with its extensive public agencies and workers.

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