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Sweden and EMU
Swedish majority for euro membership fades away
Swedish public opinion has swung sharply against membership of the euro, just as the ruling Social Democratic party has committed itself to joining the single currency. Some 41 per cent of Swedes say they would vota against joining economic and monetary union if a referendum was held today, with 35 per cent favouring membership.
A month ago, supporters outweighed opponents by 40 per cent to 32 per cent, according to the country's Temo polling organisation. The number of undecideds remains high at 23 per cent, against 28 per cent in February.
Some observans think the European Commission's recent decision to block Volvols proposed SKr6Obn ($7bn) takeover of rival Swedish truckmaker Scania, to create a Swedish national champion, has helped alienate support.
The poll is the first test of support for the single currency since the Social Democrats, led by Göran Persson, the prime minister, came out in favour of joining the euro at a special party congress earlier this month.
Sweden's drive towards EMU may go into a skid
It is extremely unfortunate timing. Just as Sweden edged closer towards European monetary union, from "No, not now" to "Yes, but later", the European Commission's response to a proposed merger between Volvo and Scania seems set to threaten the new consensus.
It now looks all but inevitable the Commission will next week block the SKr60bn ($6.8bn) merger between the country's two leading lorry groups, and in the process destroy an effort to create a Swedish champion.
While the merger will not explicitly be on the agenda of the congress of the ruling Social Democratic party - which over the next three days will move towards a final position on whether to join the euro - it could overshadow the meeting.
It is also likely to influence Swedish public opinion which is already highly sceptical about Emu. "Swedes will take it badly if two of the country's best known companies are swallowed by foreign rivals because of the Commission's actions," says one government source.
A Gallup opinion poll published on Thursday showed a hardening of anti-Emu opinion, with 37 per cent of Swedes against the euro, 35 per cent in favour, and 28 per cent undecided. A month ago the pros stood at 42 per cent and the opponents at 34 per cent. Gallup said the Volvo/Scania affair was a key factor in the turnaround.
Despite this, it is almost certain the 350 SDP delegates meeting in Stockholm will move the country a step nearer to monetary union by agreeing that Sweden should eventually join the euro.
This "Yes but later" stance will back the line already adopted by Göran Persson, prime minister, and the party leadership. It will move Sweden from its "No, not now" position and put it on a positive footing before the Swedish presidency of the European Union starts next January. Unlike the UK and Denmark, the country has never obtained a formal opt-out from Emu.
Mr Persson will argue tomorrow that single currency membership will make the country less vulnerable to currency speculators. Memories are still fresh of the attack on the krona in 1992, when interest rates briefly soared to 500 per cent in an ultimately forlorn attempt to defend the currency. He will also argue that Sweden and the EU have common goals, notably in such areas as fighting unemployment.
But the congress will provide a forum for the anti-Emu camp in the party, whose members are deeply divided on the issue. Several leading cabinet ministers are also openly hostile to the loss of the krona.
Göran Greider, editor of the Dala-Demokraten newspaper in Falun in central Sweden and an anti-euro delegate, says Sweden would be foolish to surrender its interest-rate policy to a "non-democratic body like the European Central Bank".
"Europe's economies have different cycles, and when it comes to setting interest rates it will be the interests of the big countries that are taken into account, not Sweden's," he says.
Mr Persson has himself made it clear that Sweden's economic cycle needs to be more closely aligned with the rest of Europe. At the moment the Swedish economy is booming, whereas growth in Germany, France and Italy is more sluggish. He has also stressed the country will only join when it has shown it can manage wage rounds without triggering inflation and a loss of competitiveness, which have historically only been counterbalanced by devaluations.
Mr Persson will be mindful that if the tone of the congress is too pro-euro, some Social Democratic voters will switch support to the (former communist and anti-Emu) Left party.
Partly for this reason he is almost certain to promise a referendum on the euro, even though, ideally, the party leadership would like the option of parliament alone taking the decision.
"It will be very difficult for the leadership to push for Emu without conceding a referendum," says Klas Eklund, chief economist at SEB, a leading Swedish bank.
The common expectation is that the referendum will take place in the autumn of 2002, after the Swedish general election due in September of that year. This could pave the way for Sweden to join the single currency in early 2004. "The markets are clearly assuming that Sweden will join monetary union," says Mr Eklund. Ten-year bond yields were on Thursday trading at just 16 basis points above German equivalents.
Mr Persson himself has hesitated to put a timeframe on Swedish euro membership beyond saying he expects Sweden to join within five years.