Sweden, EMU and the elected exclusion

Sweden, EMU and the elected exclusion

14 September 2013 marks the 10-­year anniversary of the Swedish referendum on the accession to the European Monetary Union (EMU). At the referendum, the Swedish people rejected participation, with 56 per cent voting against and 42 per cent for. The results revealed a strong geographical divide. The Yes-­vote was concentrated in two parts of Sweden: Stockholm and the municipalities surrounding it, and Skåne. The rest of Sweden, in particular Norrland, voted against the euro. In short, the farther north and the farther away from the capital, the stronger was the No-­vote. Today, 10 years after the “no” vote, popular support for the euro is at an all-­time low. A June opinion poll carried out by Statistics Sweden showed that 81 per cent of those polled opposed the adoption of the euro.

Although the referendum in Sweden was not binding, the government decided to respect the results and delay the adoption of the common currency to an unspecified time. But the No-­vote in the referendum put Sweden in a tricky political situation; unlike the United Kingdom and Denmark, which have opt-­outs in European treaties allowing them to remain outside the eurozone, Sweden has no opt-­out. Under the 1994 Treaty of Maastricht, Sweden is obliged to adopt the euro at some point in the future. But Sweden has not applied to join the Exchange Rate Mechanism (ERM II) and has no plans to do so (countries must be in the ERM for two years before they can join the euro). Sweden has, together with Denmark and the UK, for several years had the status of ‘semi-­permanent outsider’. The European Central Bank (ECB) has so far tolerated the use of this loophole, but has warned that new EU members will not be allowed to use it.

The municipality of Haparanda, the main town on the border with Finland in the far north, was the exception to this pattern. Here the outcome of the vote was a solid Yes. Due to Haparanda’s close proximity to Finland, many shops display their prices in both kronor and euros and the euro is generally accepted as a means of payment. It is generally held that this everyday contact with the euro contributed to the local Yes-­majority. The experience of Sweden is paralleled by that of a number of new EU states which are also reluctant to join the euro, for example the Czech Republic, Bulgaria, and Poland.

In the debate that preceded the 2003 referendum, fears were expressed in some quarters that Sweden might lose influence in the economic policy field should the anti-­EMU side win. In 1996, an independent commission, led by economic professor Lars Calmfors, had advised against joining the third stage of the EMU in 1999, but spoke cautiously in favour of adopting the common currency at a later stage. The commission concluded that there was a strong political rationale for joining the EMU as Sweden would improve its position within the EU decision-­making process.

Monthly Policy ReviewWhat the Swedish fringe position has meant for Sweden’ʹs ability to influence the EU has been much discussed in recent years. According to some studies, the fears that Sweden would become politically marginalized have not come true, partly because Sweden’s position in various networks have been strengthened rather than weakened. However, Swedish politicians and diplomats have repeatedly argued that the exclusion has been, and still is a problem, and therefore should be taken seriously. Speaking at the London School of Economics in January, Finance Minister Anders Borg said that Europe is at a crossroads with exposed structural problems following the financial crises. Mr Borg warned that recent proposals aimed at building a Eurozone-­only fiscal union threatened to build a permanent division in Europe: “Solutions to Europe’ʹs common problems should be discussed, negotiated, and agreed on in settings where all EU-­27 states are represented. Separate structures, or joint structures on an uneven footing, would undermine, rather than support, European integration.”

In a newly published report by the Swedish Institute for European Policy Studies (SIEPS), Magnus Jerneck looks at Sweden’s influence in the EU after the crisis. In the report, he argues that enhanced cooperation between the euro countries presents Sweden with a challenge as those EU Member States that have chooses to remain outside the Monetary Union will find it increasingly difficult to exert influence in the EU: “The risk of political marginalization is set against supra-­nationality, and autonomy against possibly increased political influence in the Union”.20

Mr Jerneck writes that even compared to other countries outside the eurozone, Sweden is only involved in the current talks in a limited way; they have only signed the so-­‐‑called fiscal pact, which aims to regulate the structural budget deficits and which came into force in January this year. As Sweden stays out of the EU monetary and fiscal area, it keeps being left outside of the principal strategic discussions. Therefore, Sweden risks ending up in a position with limited powers -­ a position Sweden, at the time of being an aspiring EU member, wanted to avoid. Any state wanting to influence the European agenda at a time when the EU is searching for new mechanisms for dealing with future financial crises must be located inside or close to the inner circle. Even though Sweden has chosen its current Swedish exclusion from the EU’s inner centre, the author believes it would be surprising if the Swedish political elite considers a permanent exclusion from the EMU as politically viable, despite the negative public opinion towards membership.

Similarly, a recent article published by the Polish Institute for International Affairs, argues that the benefits of Sweden staying out of the Eurozone may actually be smaller than the Calmfors report suggested 17 years ago. Recent studies indicate that Sweden has very little autonomy in terms of monetary policy, with the Central Bank of Sweden already following ECB monetary policy: “the lack of a Swedish voice in Frankfurt is thus a real deficit”. The authors argue that where Sweden has managed to protect its vital interests, the success is due to a convergence of interests in Stockholm and London concerning financial issues. Taking into account that the country is already deeply integrated into the EU, it seems that for Sweden EMU membership would today entail more political benefits than costs. In addition, Swedish (and Polish) decision-­makers have to bear in mind that the number of non-­euro zone members is steadily decreasing. Provided that there are no exits, by 2015, more than two-­thirds of the EU28 will be composed of states with the common currency. As a result, non-­eurozone countries’ leverage is likely to decrease on many issues, including further Eurozone financial or fiscal integration, according to the article.


All parties in the current Swedish government favour deeper European integration. Despite this, the government will not look to join the EMU until there is strong and broad public-­and political support for it. Sweden has a tradition of seeking broad political support across party lines in matters on issues such as the EMU and other major foreign policy issues. Meanwhile, the political consequences of the euro crisis are considerable with a widening of the gap between the countries inside the eurozone and the other EU Member States. Furthermore, tensions regarding implementation of the various aid packages have altered the balance of power in the EU and have created a potential for more conflicts between the Member States. Due to its elected exclusion from the EU inner circle, Sweden finds itself in an increasingly difficult political situation, and, once the banking union is developed further, the exclusion could become even more disadvantageous.


Note: This is a shortened version of the original. The full set of footnotes are only available in the subscriber version.