According to the plaque, erected a week ago in Malmö, the famous opening lines, "It was Christmas Eve, babe, in the drunk tank", were scribbled down by the band's frontman, Shane MacGowan, while on tour in the city in 1985.
MacGowan had been found unconscious in his hotel room, and rushed to hospital where he was diagnosed with double pneumonia. As he lay in hospital recovering, he found time to work on the song.
"Shivering with fever, he asked for a pen and paper. There, at Malmö's hospital, he wrote the basis for Fairytale of New York," Anders Albien, a former booker for the Malmö rock venue KB, said at an event in Malmö to unveil the plaque. "It is a story that deserves a place in Malmö."
The band were about to launch their European tour with a gig at KB when MacGowan was found and Albien said that he had offered the audience a choice: their money back or a performance with the band's then producer, Elvis Costello, standing in as front man.
The suggestion was greeted with a roar of approval and the gig went ahead with Costello and the band's penny whistle player Spider Stacy taking turns at the mic.
But that night, MacGowan woke up, asked a nurse for writing materials, and sketched out the beginnings of Fairy Tale of New York.
MacGowan always maintained that the idea for the song had come from Costello, who had bet the band that they would not be able to write a hit Christmas single. The band's manager, Frank Murray, however, has claimed that it had been his idea to write a Christmas song.
MacGowan described writing the lyrics in a Malmö sick bed in an interview with the BBC in 2005. "You get a lot of delirium and stuff, so I got quite a few good images out of that," he said.
In addition to the plaque in Engelsbrektsgatan on the walls of the Hotel Temperance (a somewhat unfortunate connection given MacGowan's heavy drinking), a second plaque will be erected at the hospital building in Malmö where MacGowan stayed.
The plaque is one of a series of new commemorative signs being erected in Malmö by the city's cultural administration, together with the Malmö Beautification and Planting Association. You can find the full list here.
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