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September 16, 2003

Without Glue of Euro, Bond May Dissolve

By ALAN COWELL

STOCKHOLM, Sept. 15 One day after Swedish voters ruled out for years to come the likelihood of adopting the euro single currency, Europe's great project to bond its disparate players into a single force to rival the United States seemed doubtful.

The Swedish referendum rejecting euro membership by a staggering 14 percentage points not only bolstered euroskeptics in the other holdout countries Britain and Denmark but also reinforced the possibility that, far from being one, Europe could soon be perceived as falling into three castes.

The first, led by France and Germany architects of the single currency, intended to shield against the wars that stud the Continent's history would embrace primarily the 12 nations using the single currency. Paris and Berlin are allies distinguished as much by their inability to inspire economic growth as by their refusal to support the United States in Iraq.

The second, in terms of economic and political power, would be a loose alliance of eurozone holdouts, while the third would be drawn from the 10 countries, largely from the former Soviet empire, expected to gain their long-coveted European Union membership next year. Those nations are committed to joining the euro but must first make wrenching economic adjustments.

"The dog that never barked in the European Union is this notion of reinforced cooperation, where some countries go ahead in different areas internal security, defense and now the euro," said Katinka Barysch, chief economist at the Center for European Reform, in London. "We are heading to a new debate about a European Union with much larger internal differences."

Within the 15-nation body, national agendas are nothing new. Britain, for example, seeks prominence in efforts to build European military cooperation, but remains aloof from both the euro and agreements that have opened borders across much of Continental Europe.

But the Swedish vote, some analysts suggested, may have taken that process a step further by enshrining the idea that individual exceptions outweigh commitments to the pan-European ideal. Technically, for instance, Sweden had already agreed to accept the euro in a 1994 referendum on joining the European Union.

"If Great Britain wants to be Atlantic, and Poland prefers Washington to Brussels and if Spain believes just as strongly in Hispanidad as it does Europa," Sergio Romano wrote in his column in the Corriere della Sera of Milan, "it is difficult to imagine that a market and a coin are enough to create a European patriotism."

The distinctions seem likely to persist. Swedish leaders said it could be 10 years before they sought euro entry again, while euroskeptics in Britain argued that, as Janet Bush, an anti-euro campaigner, put it, "it is now highly unlikely that British public opinion will be moved on the euro for many years to come."

In some ways, the outcome showed how hard-headed, relatively prosperous Swedes had come to view the eurozone recession. They looked askance at France's and Germany's failure to adhere to the euro's internal rules as they tackled deficits.

The euro's "biggest adversaries were and are the governments in Berlin and Paris," said an editorial in the Berliner Zeitung, which added that France's and Germany's economic retreat "is increasingly paralyzing the entire Continent."

For all that, it seems unlikely that the Swedish vote will galvanize the big eurozone countries into changing policy. "I view it as a wake-up call, though I'm afraid they won't hear it," said Daniel Gros of the Center for European Policy Studies in Paris.

The vote seemed as significant for its repercussions outside Sweden as for its consequences within.

Prime Minister Tony Blair's government, in a credibility crisis over Iraq, had already postponed a pro-euro "road show" planned for this summer. Mr. Blair's spokesman repeated today that British membership depended on arriving at a "clear and unambiguous" assessment that it would be in Britain's economic interest to join. But the prospect of efforts toward a referendum before the next election, expected by 2006 at the latest, seems remote.

Analysts here said the Swedish vote might encourage euroskeptics in Denmark, which rejected euro membership three years ago. The vote may also prove a setback for politicians in neighboring Norway who are trying to nudge the country toward joining the European Union.

But some say the Swedish vote reflected the emotions of a Continent whose people feel remote from ruling elites and who sense that the European project negates their democratic aspirations. "This was an antiestablishment cry," said Goran Rosenberg, a leading Swedish columnist. "This was a sign or a warning, and not just for Sweden."


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