Monday, November 03, 2008

Move Into Euro

The Danish and Swedish governments have begun preparing the ground for referendums on joining the euro, as part of a huge political reversal across Europe's northern fringes in favour of the single currency. Although voters have overwhelming rejected the euro in the past, both countries are now pointing to the recent damage inflicted on their national currencies as evidence that staying out has left them dangerously over-exposed to market vagaries.

"The financial turmoil has made it clear to all Danes that there is both a political and economic cost of staying out of the eurozone and that's why we should join it as soon as possible," the Danish Prime Minister Anders Fogh Rasmussen said this week. He voiced frustration at not having a say in bail-out plans drafted by Eurozone economies. "We just had to follow the rest, who took a decisive lead."

Danes were now having to carry a "very heavy burden", Mr Rasmussen said, after the Danish Central Bank's move to raise interest rates to 5.5 per cent to support the krone. The Danish currency is closely pegged to the euro and has come under fierce pressure as investors dump it in favour of bigger and safer currencies. "Over half of the electorate is now in favour of the Euro and the reason is simple: before, we had to warn them about the danger of staying out, now they're actually experiencing it for themselves."

In Sweden, the krona has plummeted to its lowest value against the euro since the currency's launch in 1999. "We should have joined the euro a long time ago, we would have been far better off," Cecilia Malmstrom, Sweden's Europe Minister said yesterday. "It makes no sense whatsoever for us to stay out and if we could hold a referendum tomorrow, we would."

Euro fervour has even spread as far as Iceland, which although not a member of the European Union, is now also seriously considering swapping its own currency which has nose-dived by more than 40 per cent this year.

A large majority of Swedes voted against the euro in 2003 but a new opinion poll shows a major turn-around in public opinion, with over 46 per cent saying they are now ready to surrender their beloved krona, which is emblazoned with their queen's image. "This has change has happened without any campaigning from our side so I'm sure that we turn it into big majority, which is why we should try to hold a re-run of a referendum as soon as possible," Ms Malmstrom said.

Although the Swedish Prime Minister, Fredrik Reinfeldt, says he will not organise a referendum before 2010, three out of the four ruling parties say they will hold a poll soon after. The Danish Prime Minister has refused to name a referendum date but senior officials say they do not rule out a poll as early as next year. But despite the current enthusiasm, both governments will struggle to address deep-rooted fears among their voters that giving up their currencies would tie them closer to the EU.

On the Drottninggatan, a shopping street in Stockholm, Swedes were divided. One man in his fifties held out a handful of coins, saying: "I know the value of this money, it's safe and I don't see reason to change." A mother fretted about rising prices if the euro was introduced. "Things will just get more expensive like they did in other countries."

The Eurozone: Who's a member?

*There are 15 member states of the Eurozone. They are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia and Spain. Slovakia will join in 2009.

Source - Independent


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