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Socialdemokraternas VU om EMU


The Executive Committee of the Swedish Social Democratic Party has today unanimously adopted the following proposal for a decision regarding Sweden’s participation in the third stage of EMU. The proposal will be discussed at the National Executive Board meeting on January the 21st and provide a platform for the position which the Party Congress will determine in March.

The discussion on a Swedish participation in the third phase of the EMU has been intensive within the party. The Party Congress held in Sundsvall in 1997 passed a resolution to the effect that a Swedish participation in the third phase of the monetary union starting in 1999 was not timely. The Party Congress 1997 drew up a list of four principles:

  1. The position adopted by Sweden must be based on what is judged as best for Sweden in political and economic terms.
  2. Sweden must have maximum room for manoeuvre. The position of economic strength, which has been achieved, must be managed with care.
  3. The Social Democrats will monitor the EMU process and maintain close ties with our sister parties in those countries that participate in the monetary union. Progress will be continuously analysed and scrutinised. Preparedness for action must be high.
  4. We shall carry out an open discussion. Our general attitude must be characterised by an extensive effort at acquiring knowledge on the subject and ensuring an open exchange of views within the labour movement.

Since the Sundsvall congress the EU has taken a number of decisively important steps. A high level of employment has been adopted as a common goal for the EU. The process of enlarging the union with new member states has been set in motion. The EMU has become a reality. Eleven of the fifteen countries participate in the monetary union. The EMU accounts for one fifth of the global economy. The Euro will be used as a means of exchange in the daily lives of 290 million people.

All the sister parties in the PES –The Party of European Socialists – are positive towards the EMU. The probability of the monetary union being extended further to include other countries within the next few years is very high.

Here in Sweden we have acquired freedom of action. The decision made recently by parliament on the independence of the Riksbank has removed the constitutional barriers to membership.

The surplus in public finances, the rapidly declining national debt, the low level of interest rates and the stable rate of exchange for the Krona all mean that we are now in a position where, unlike the situation only a few years back, we meet the criteria for membership. This means that Sweden can join if we so wish but at the same time it also demonstrates that we have the economic strength to remain outside the EMU.

The people of Sweden have been invited to take part in a debate and discussion on the question. At the national level a broad campaign of popular education has been set in motion. Within the party printed information, a large number of study circles and an open discussion have provided a platform from which the members of the party can scrutinise and express their opinions on the party’s position on the EMU.

Many of the replies sent to the party have raised objections to Swedish membership. There are criticisms of the European Central Bank’s lack of democratic roots as well as concern for the growing trend towards supranational structures following in the wake of the EMU.

Several replies argue that the economic risks involved in membership should be curtailed, and point to the Finnish "buffer funds" as an example of what can be done in the event of unexpected cost crises by way of providing for lower wage costs and as a way of encouraging employers and trade unions to work together to improve competitiveness.

However, a majority of the replies adopt a positive view towards the basic idea of a monetary union and towards Swedish participation. They mirror in many respects the advantages underlined by other European Social Democrats and trade unions. The monetary co-operation can contribute to provide for lower interest rates and thereby to a higher level of employment. It makes it easier for people to travel without having to worry about borders and it contributes to increased trade, better competition and to lower prices within the single market.

The Swedish Social Democratic party regards a well functioning monetary co-operation as a democratic counterbalance to growing global market forces. Such a balance makes it possible even for small countries to pursue an active economic policy. In the interests of promoting long-term welfare and work, we Social Democrats want Sweden to become a member of the Economic and Monetary Union.

Entry must be made under clearly defined preconditions. The date for Swedish membership should be set when it is most advantageous politically and economically for Sweden. The Swedish economy is currently strong and the economy is enjoying a good upswing, at a time when the economic reviews of the Euro area are more uncertain. Swedish entry into the EMU at a time when the development of the Swedish economy and the level of interest rates differ markedly from the rest of Europe would involve the risk of economic problems, increased unemployment and a widening of differentials between groups. Membership excludes both devaluation and a weaker exchange rate. Sweden must therefore develop instruments to meet possible cost crises without having to resort to drastic wage reductions or uncontrolled unemployment.

The EMU makes for demands on wage building in the economy. The development of wages in Sweden over the past few years has created substantial real wage increases and contributed to a low level of inflation but these wage agreements were signed during a period of high unemployment and mediocre growth. If Swedish wage levels are higher than those of other EU countries and productivity in Swedish companies is not higher than productivity in other countries, then Sweden will face the risk of ending up in the same situation as during the eighties with a gradual reduction in Swedish competitiveness and the risk of rising unemployment, a deterioration in public finances and the need for massive savings programmes.

With this in mind, the date for Swedish participation in the third phase of the EMU depends on two overriding considerations, as far as the Social Democrats are concerned: 

  1. There must be room for a policy to counteract a downturn in the economy.

The different phases of the economic cycle in the Euro area and in Sweden must be reasonably co-ordinated.

Differences in the level of interest rates and variations in exchange rates must be small if entry is to be achieved on advantageous terms. Public finances must be strong enough to withstand overheating, and stimulate the economy in the event of rising unemployment.

  1. Wage increases in Sweden must keep pace with wages in the rest of the EU.

In the interests of jobs and of fairness Sweden needs a wage building process which, even during economic upswings with a fall in unemployment, creates satisfactory real wage increases without nominal wage rises undermining our competitiveness. As a part of our preparedness to counteract eventual crises and a deterioration of Swedish competitiveness, the need for and the shape of Swedish so-called buffer funds will be investigated. The coming wage bargaining round must be completed, and properly reviewed, before we can consider Swedish membership of the third phase of the monetary union.

When Sweden is in reasonable step with the economic cycle in the Euro area, has a wage building process which works demonstrably well and has the means to uphold Swedish competitiveness and carry out an active economic policy then is the time for Sweden to join the monetary union. In order to ensure popular support the question of Swedish membership in the third phase of the EMU must be put to the decision of the Swedish people.

The Social Democrats will – together with other social democratic parties in the EMU – work to ensure that the European central bank is well rooted in the democratic process through a close dialogue with the democratic institutions and those organs which shape the economic policies of the union.

We want to see each and every democracy growing in strength through European co-operation. We do not want to see a development within the European Union that strongly limits the power of the national parliaments. The PES has also agreed upon that national identity must be maintained and that countries shall remain independent in deciding on those questions that are best addressed at the national, regional or local level.

Through co-operation within the European social democratic movement we will ensure that the common currency – together with economic co-ordination and a European growth strategy for increased demand and greater investments – can lead to economic growth, jobs and stability.

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