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Parties hold firm on euro despite Greek crisis

The Local · 12 May 2010, 16:29

Published: 12 May 2010 16:29 GMT+02:00

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Sweden's backing of the bailout of the eurozone economies has been defended by finance minister Anders Borg as underlining Sweden's interdependence with its EU partners.

All the larger political parties came out in favour of Sweden’s membership of the euro in a 2003 referendum and a telephone survey by The Local indicates that political support remains strong for Sweden to eventually join the eurozone, although few are willing to commit to a concrete timeframe.

The Liberal Party (Folkpartiet) is the party which has perhaps gone furthest to establishing its credentials as a staunch advocate of Sweden joining the euro, and the ongoing eurozone debt crisis has done little to dent their resolve.

”We want to join the euro and we want to have a referendum in the coming years, within the next mandate period,” said Mathias Sundin, parliamentary candidate for the Liberal Party in Östergötland, to The Local.

Sundin emphasised that the party’s line has not been affected by the Greece crisis.

”The crisis in Greece is not because of the euro, it’s because of the way Greek politicians have ruined the Greek economy with short-sighted policies. Greece’s membership of the euro forces it to fix the economy, if they had their own currency they wouldn’t have to,” he said.

Despite the Greek problems, Sundin argued that the Liberal Party is in favour of supporting the bailout plan as ”the other option of a bankruptcy would be worse for Sweden, the EU, and the world”.

The Social Democrats were in government when the 2003 referendum was held and led the chorus of parties and Swedish business leaders in favour of adopting the euro. While support in the party remains strong for Sweden to, a new referendum is not an immediate priority.

“We haven’t changed our minds because of Greece, but the situation reinforces the need to wait longer. It is too soon to have a referendum in the next four years. It is important to review the situation and look for a referendum in 2014,” said Sven-Erik Österberg, Social Democrat Party member of the parliamentary advisory council on foreign affairs, to The Local on Tuesday.

Österberg underlined the party's position that it is important for Sweden to join EU partners to pull together to help out.

"If it's necessary, we should, because it's important for the whole situation in the EU to stabilize Greece. Otherwise it can spread to Ireland, Estonia, Spain, Portugal, and the UK, especially after the election, as we don't know what the new government will do yet."

Österberg argued that while there is unity in the centre-left coalition on their position with regards to the euro and a new referendum, the centre-right government is more split.

Left Party spokesperson Britta Kellgren, however indicated to the Local on Tuesday that the centre-left coalition may not be as unified as the Social Democrats claim.

”We are against the euro and Sweden taking part in the euro. We believe the independence of the country and the economy would be destroyed; it is very risky and the developments of the last few weeks demonstrate that,” Kellgren told The Local.

Kellgren also rejected the idea of a new referendum on euro membership.

”There is no need for a referendum, we don’t want another referendum. We had a referendum in 2003 and the Left Party was against it then,” she said.

The Green Party removed the requirement to leave the EU from its party programme in the autumn of 2008 but remains opposed to Swedish membership of the euro and a second referendum.

”Sweden should keep out of the euro and not have a referendum. We are all too different and we should not have the same interest rates across the countries,” said Ulf Holm, the Green Party member parliamentary committee on European affairs, to The Local on Tuesday.

While Holm argued that it is too early to judge the fall out of the Greek debt crisis, he advised that the Green Party has become more sceptical towards the euro than before.

”I think it is necessary to help Greece out because the crisis can affect other countries outside of Europe and it’s necessary to stop that from happening,” he said.

On the issue of a second referendum, Holm stated that the centre-left coalition had agreed not to hold a referendum before the next election (in 2014).

The Moderate Party is the largest of the centre-right coalition and while they are principally in favour of joining the single currency, during campaigning for the 2009 EU election party leader Fredrik Reinfeldt appeared keen to deflect calls from coalition colleagues for a new referendum in the near future.

”We are in favour of Sweden adopting the euro, however we have also said that we should respect the outcome of the referendum in the meantime. But we want Sweden to adopt the euro eventually,” said Gustav Blix, Moderate Party deputy member of the parliamentary committee on European affairs, to The Local on Tuesday.

”We should have another referendum, adopting the euro would be a good thing for Sweden in the long run, but we need a well functioning monetary policy in Europe and a stable eurozone,” Blix said, adding that Sweden should be prepared to ”take our share of the responsibility” to help troubled EU economies, but should insist on ”high requirements” for reform.

The Christian Democrats amended their position during campaigning for the EU elections and in May 2009 joined their Liberal Party colleagues in calling for a new referendum sooner rather than later, in what many commentators dismissed as an attempt to attract the pro-EU vote.

"We would love to see Sweden in the euro. You can't change your position because of a one-off crisis," said Emma Henriksson, Christian Democrat member of parliament, to The Local on Tuesday, indicating that the party's 2009 shift was a longer term move.

Henriksson also argued that the crisis is not the direct fault of the euro and "would have been worse in many EU countries" without it, while underlining that the Greek bailout was mainly a question for Greece and the euro countries.

Story continues below…

"But if we are asked to support Greece, we should consider it, regardless of whether we are in the euro. We are dependent on one another, so you need to be prepared to join in," she said.

The Centre Party aligned itself with the no camp in the 2003 election and despite several leading party members in October 2008 voicing a call for the adoption of the euro after a new referendum, the party's position remains the same.

"No. Sweden is doing just fine with the krona. It is our position that we should stand outside the euro but we are prepared to support a further analysis of the situation," said Staffan Danielsson, Centre Party member of the parliamentary committee on EU affairs, to The Local on Wednesday.

Danielsson also stated that the main responsibility for helping troubled eurozone countries should lie with the euro countries themselves but emphasised that Sweden benefits from a stable situation in the EU.

"Euro countries should take responsibility for their own predicament. If the situation would deteriorate then of course Sweden could be harmed but we are satisfied that the current measures will be sufficient to avert further problems."

The Centre Party sees no immediate need for a new referendum but is supportive of the government's policy that an evaluation of Sweden's position regarding euro membership could be conducted within the next mandate period.

"It is always positive with a new analysis. We will have to see how the euro develops and the results of any evaluation before considering whether we need a new referendum," Danielsson said.

Sweden, like the UK and unlike Denmark, holds no formal opt-out from joining the euro and must join the single currency when a series of macroeconomic criteria are met - including national debt, interest rates and exchange rate stability. In practice Sweden holds the right to decide when, and if, to join the euro by simply avoiding to meet all the criteria.

Peter Vinthagen Simpson & Vivian Tse

The Local (news@thelocal.se)

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Your comments about this article

09:25 May 13, 2010 by Nemesis
Estonia has just been told it is elligeable for entry into the Euro in 2011.

Sweden needs to get its finances in order and get itself into the Euro.

Most of Sweden's business is with the Euro area. The constant fluctuations in exchange rate are bad for business and holding Swedish business back due to reactionary, vested, zenophobic interests.
11:58 May 13, 2010 by Elton John
The Euro is a sinking ship. I prefer "holding Swedish buisness back" to "CRASH". Greece is going to hell and which countries are next? Ireland, Spain, Portugal and also Italy in a near future. No, let's stay away from the toxic Euro.
13:17 May 13, 2010 by pk01
Nemesis - re: Sweden needs to get its finances in order and get itself into the Euro.

Actually - Sweden is one of only two countries to meet the Euro zone debt and deficit limits - Estonia is the other. Neither use the Euro - all the others break the rules habitually.
13:31 May 13, 2010 by bbeynch
I used to be strong Euro supporter. But after the last few years of economic chaos, and especially the Greek socialist experiment on the back of the Euro, with the rest of the Mediterreanian Rim on the brink, I have made a 180. Sweden should put its application into the Euro on a ten year hold, Estonia notwithstanding.
17:29 May 13, 2010 by JonnyDee
The Krona overall has held itself very well and the countries that haven't accepted the Euro have actually strengthened economically (Britain, Norway) - Acception of the Euro is good for small, developing countries (like Estonia, Lithuania, Greece, etc) because then they have the backing of larger better developed economies, but the larger economies (Sweden, Germany, France, etc) have seen their economies looted to bailout these smaller countries, so NO Sweden should not accept the Euro. Sweden has a strong, well developed economy that is stable and is the envy of many.
23:33 May 13, 2010 by krrodman
Why does the EU exist? The standard answer is that is an economic union to provide a competitive advantage to the Eurozone - a collection of countries to compete with the USA.

Everyone knows the standard answer is a canard - a smokescreen to hide the true intent of the Eurozone. The utopian visionaries of post WWII Europe believed in a socialist future in which the competition between European countries - the root cause of two world wars - would be eliminated by a union between the countries analogous to the union formed between the individual states in the USA.

Europe in the post war years was not ready for a political union. Each country was intent on protecting its national identity. An economic union was an easier first step. The utopian elite understood that a full political union would soon follow because economic policy and social policy are deeply interconnected. Just ask the Greeks! Their socialist world is being dismantled in order to meet the demands of the monetarists. Needless to say, if they still had the Drachma instead of the Euro, they would have been able to devalue their currency and continue their profligate ways.

Yesterday, the European Commission proposed that the budgets of each European country should be examined to ensure that it meets EU standards before it is enacted. It is just another example of the monetarists wanting to control social policy by controlling economic policy.

Every country at one time or another has needed to manipulate its currency in order to maintain social order, that is to say, in order to continue critical social policies. Once Sweden joins the Euro, its social policies will be at the mercy of the bureaucrats in Bonn rather than their elected officials in Stockholm. It would be a huge mistake. Just ask the Greeks!
17:34 May 15, 2010 by wenddiver
When one looks at the EURO and the potential endless bail-outs Pourtugal, Ireland, Greece, Spain, (the entire Balkans soon), etc., etc., it makes having your money in Confederate States of America dollars look safe, although I am being unfair to the Confederate dollar, which at least appreciates due to collectability, ha, ha.

The Danes are really smart on this one.

Any Bank holding the majority of it's money in EURO's might consider diversifying by getting some of the money from Disneyland with Mickey Mouse on it, in five years it will at least have value at Disneyland.

The EURO is a competition to see what country can cut it's losses first France or Germany, the rest of Europe will ride this burning airplane right into the ground. Stick to the Krona and you can donate to charity when they go bust (when not if).
20:56 May 15, 2010 by Bensonradar
Greece got many financial benefits from joining the Euro, and then spent the lot.

Nicolas Sarkozy, the French President, threatened to pull his country out of the Euro if other eurozone nations did not agree a deal to bail out Greece at a summit in Brussels last week.

So if Sweden joins the Euro, it will be forced to bail out Portugal and Spain who have been forced to agree tough austerity measures to address their debt crisis.
07:54 May 16, 2010 by jamtlandtom
Will someone explain what is so attractive about the Euro that has politicians in particular and of course "the Metropolitan Elite"(most of whom seem to live in Danderyd!!) salivating to join. Particularly since recent events have shown up the intractable problems with the Euro?
14:04 May 16, 2010 by krrodman
As a practical matter the EURO is an economic alliance that increases efficiencies and decreased competition between member states.

As a utopian dream, the EURO represents the hopes and aspirations of post WWII politicians of a future in which workers are treated with dignity and respect, competition between rival countries will disappear, and war will no longer dominate the European landscape.

The problem with Euroland, as it now stands, is that the political will does not exist to form a political union to go along with the economic union. And, once the economic union fails, as seems likely at the moment, there will be nothing of substance to hold the union together.

Let me rephrase: The EU, as originally planned, was to be a union of the strongest eonomies in Europe to compete with the USA. In theory, it could revert to that format with a union of Germany, France, GB etc, making sure to leave out the weaker PIIGS and the Baltic States. As an economic union, it would prosper. The utopian dream of a united Europe would disappear.
17:05 May 16, 2010 by cogito
It is an obvious but often forgotten lesson of economics: what cannot continue will not continue.
14:33 May 18, 2010 by mieoux
I agree with wenddiver. The Euro is a Ponzi scheme and will crash

as more bailouts come onto the schedule for countries which we already

know have outrageous debt to GDP ratios even worse than Greece's.

I question the usefulness of even being a member of the EU to begin with. What has EU membership done lately for any country that had well managed finances and a well running economy before it joined the EU?

EU is only useful if your economy is a shambles and you think you'll benefit from a bailout at some point in future and even then, it's only useful at the time you are getting the bailout.
09:06 May 19, 2010 by americanska
The more countries they add to the Euro the less stable it becomes.
12:28 May 19, 2010 by Marc the Texan
Years ago I was a booster of the EU and the Euro, now I think Sweden and member states should be reluctant to cede any more sovereignty to the EU and the EMU. Sweden should be thankful for not entering the EMU. Spain for example, was in good shape and had no deficits before the crash, but they have no control over their monetary destiny and as such France and Germany run a policy that will only hurt Spain for years to come. All the Euro's gravity is with Germany. If you are a small EU state that has an economy out of sync with Germany, the Euro will squeeze the breath out of your economy. Sweden should continue to steer clear of EMU.
19:37 May 19, 2010 by stateohio905
Currencies, are wonderful adjustment mechanisms. They make it easy for countries to continue to do business with each other even as they experience different growth rates or prices, or changes in productivity. But when countries adopt the same currency and give up this adjustment mechanism, there tends to be mispricing of wages, products and financial risk.

The problem with the trillion-dollar rescue package, it does not solve fundamental problems but merely postpones the day of reckoning. At this point, it is almost inevitable that a country like Greece will be forced to default on its debt unless it is willing to put itself through a grinding process of reducing wages and prices on the order of 20 percent -- and even then, there is a good chance it will be so dragged down by depression and deflation that it will be unable to service its debt anyway. At that point, the only way to avoid default will be if German, French and Dutch taxpayers are willing to step in to pay off a large portion of the debt of their less-productive neighbors.
18:14 May 20, 2010 by fritton
It seems the Riksbank is trying to manipulate the foreign exchange markets to keep the Krona from appreciating any more against the Euro. As a result it is currently depreciating against the pound sterling. Comparing the macroeconomic situation of the UK (worse than Greece) and Sweden (best in Europe) this obviously is a policy doomed to failure. Maybe Sweden would be better off having its monetary policy decided in Frankfurt formally as it is evident this is happening already on an informal basis. At least this would be more transparent.
02:06 May 21, 2010 by krrodman
While the Swedish macroeconomic situation is very good at the moment, the problem is that if Sweden joined the Euro, Sweden would lose the ability to manipulate their own currency to suite their macroeconomic needs.

Every country, at one time or another, has needed to manipulate its currency to satisfy its socio-political needs.

Why give that up to satisfy a fractured fairy tale?
07:50 May 21, 2010 by Elton John
wenddiver: How much will a California bailout cost? The US dollar in not more safe than the EURO. If the USD had not been a world currency it would have crashed a long time ago. But more and more countries (especially China) are trying to get rid of their stock of dollars, so we can expect an inflation soon and that might be the end of the USD as we know it.
10:56 May 21, 2010 by planethero
Governments will to add up. The UK is the real stinker in this, just because the debt is so huge, the same as greece per person, but 60 million folks.
11:37 May 21, 2010 by krrodman
@Elton John

I think that you miss the critical point here: the USA has a mechanism to bail out California. The EU, because it is an economic union but not a political union, never created a mechanism to deal with profligate countries. I am sure that you would agree that the political will does not exist in Europe at this time to create a formal political union.

The dollar is not inherently "better" than the Euro. But, at this moment in time, the United States is better able to manage its problems than the EU. The Euro will recover soon, but unless a mechanism is put in place to form a more coherent political union in Europe, the economic distortions will sink the Euro.
19:42 May 25, 2010 by mkvgtired
stateohio905, very well said. I wrote about Greece's financial problems on my blog one year ago. I definitely did not foresee Greece's financial problems coming to the fore so soon. If the US and other European countries continue to add government programs similar to Greece's, we can expect even more market and currency adjustments in the future.

01:50 May 30, 2010 by orwellian
Unbelievable. How stupid are people? People still want to join a sinking ship. I am glad I voted no though, too bad people still fail to see why we were right all along.
02:05 May 31, 2010 by wenddiver
@Elton John #18- I stand corrected. The cognition of the individual state/country is all important. Anybody wanting to transfer their money as individuals, certainly has the ability to do so. It, like the dollar is easily availble on the open market. There are no limits to the amounts you could trade.

Why no rush to the banks? Perhaps the Krone, the Pound and the Dollar all have the backing of a Nation group that is unlikely to dissappear. If we were talking about a stock this is what Warren Buffet would call a moate. It has a brand recognition that gives it a stability and value that a monetary union will never have.

California has debt, TRUE. But their is NO obligation on the part of the other 49 States to bail out California. Many States much to their detriment have essetually screwed themelves. Think of Mississippi or Virginia at the end of the Civil War, some of the biggest war debt in the history of the world, the biggest part of their budget going to pay for artificial limbs, a labor force that has essetually escaped. What was the total US Government bail out-----NOTHING.

California will address California's problems (whith one of the biggest economies in the world she can if she takes realistic action), if she doesn't she will suffer a decade of loss like the Eastern Rust Belt did in the 1970s and 1980s.

China buys US Dollars, because they are backed by an enormous industrial potential, and one of the hugest piles of natural resources the world has ever scene. Do we have to discuss technology? China wants US dollars, because they are smart businessmen and they know the truely rich of Europe made their money in the Americas.

But again anybody wanting Euros will find them trading at very good rates in comparison to the monies of the nation states, but so are the Mickey Mouse dollars at Disney World.

If Washington wanted too, they could buy several tons to prop up the Euro? Why ask you to bail them out????
09:19 June 7, 2010 by the fonz
I am not surprised - If the politicians now change their stance on the Euro - that would mean admitting that they were wrong - no chance!

Sweden has done well to stay out and is in very good shape - I keep hearing 'it will be good for Sweden' but nobody explains exactly why - fluffy statements like 'holding us back and good for jobs' have no foundation because if so - has the UK, Switzerland, Norway suffered specifically by rejecting the Euro? No absolutely not and nor has Sweden.

It doesn't work, it makes no economical sense and will probably be watered down or scrapped either partially or in full.

Ever heard the saying about the turkey voting for Christmas?
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