Sweden Says ‘Nej’ To Euro

Perhaps unsurprisingly, Sweden has rejected adoption of Euro by a vote of 56% to 42%. This means that Sweden will not give up their currency for the Euro in 2006 as the government had hoped.

I’d been thinking that the horrible murder of Foreign Minister Anna Lindh, one of the Euro’s biggest Swedish proponents would have pushed Sweden more towards a ‘yes’ vote but it is clear despite the grief over the loss of the Lindh, the Swedish public remained unmoved in their desire to reject further Euro integration. Despite the fact that the government and media elites were pushing integration, the Swedish people made the rare statement in Swedish politics of going against their wishes on the matter.

What is also odd about this is the fact that Euro-opponents represented the ends of the political spectrum, from right-wing groups to economic libertarians to Communists and many in-between. The right feared that increased Euro-zone regulation would hamper what economic freedom there is in Sweden, and the left saw that the Euro could unravel Sweden’s longstanding socialist welfare state. Those in the middle realized that the strong Swedish economy would gain nothing by entering into a confederation with the anemic economies of the other members of the Eurozone.

Dave Carr at Libertarian Samizdata believes this spells the beginning of the end for the Euro. Indeed, with France, Germany, and Italy all backing away from the debt limitations of the Maastricht Treaty, it is clear that the Euro is in deep trouble. Chirac especially knows that his political loyalties do not lie with the EU, but rather with the French syndicats that are the real political power in the country. If Chiraq pulls out of the Euro he can ignore the Maastricht Treaty debt limitations and play to his base by trying to build up the French military while still ensuring that the government’s largesse keeps the unions happy.

Unfortunately, while the Euro falling apart would be a nice comeuppance for Europeans who say that America can’t play by international rules then can’t keep their own alliances together, it’s also a very bad thing for the world economy. A Europe in an economic tailspin doesn’t benefit anyone, especially as America is slowly dragging itself out of recession. While European markets aren’t critical to the US in the way Canada or Asia is, a collapse in the Euro will only spook investors more, making a recovery more difficult.

However, the Swedes are right on this one. The Euro is not a smart bet right now, and the future prospects for European economic integration are bleak. Unless France, Germany, and Italy commit to reducing spending and reducing debt (something that is politically impossible for both Schroeder and Chirac, and to a lesser extend Berlusconi) the chances of the Euro being cohesive are slim. Sadly, it appears that this situation will get much worse before it gets better.