The Swedish NO : absence of European citizenship? - 26.09.2003

 The dilemna facing Swedish European citizens in the face of the deplorable economic governance of euro-land.
      

« Not a defeat for Europe » » writes an editorialist who two lines further down welcomes the victory for Europe of the vote in Estonia. A chameleon would not do better.  The editorialist sees in the Swedish vote the recognition of a Europe respectful of national particularities. In reality, the vote shows that national interests still prevail over the common European interest. Indeed, the Swedish vote exhales a perfume of the first Irish vote on enlargement : it shows how far off the mark we still are on European citizenship. The euro is the symbol of European integration : to reject it reflects a lack of confidence on Europe's capacity to improve our common well being. Swedes prefer the comfort of their favourable social system to the prospects of having to work together with their European partners to acquire a satisfactory common social protection. Their decision is particularly damning for Europe as it will influence the outcome of the referenda in Denmark and the United-Kingdom and delays by 10 years the implementation of a Europe-wide financial market. The Swedish vote is a serious set-back for Europe.  

This being said, the Swedish vote is understandable: economic governance in euro-land is in shambles. At its best - in year 2000 - the GDP of the euro zone grew at 3.4% - far less than the growth rate of the Anglo-Saxon economies that reach regularly 4 or 5%. The economic performances of euro land falls below  the average in the industrialised world and far below that of the major economic blocks  (USA, China, India ). Whatever growth is observable in euro-land comes from the poorest countries and remains almost inexistent in the French and German locomotives. In euro-land, the average unemployment rate remains above 8-9% with a number of countries reaching more than double that in EU countries outside the euro-zone or in the USA. The current low inflation rate in euro-land does not guarantee that the European Central Bank will manage to keep prices down during periods of rapid economic growth. Finally, imperfections of macro-economic statistics do not minimise the significance of these comparisons.

This bleak picture is the result of the hesitation by some national governments to implement the liberal underlying philosophy of the euro. Considering the restrictions - budgetary and others -  imposed by Member-States on the European Commission, the only economic policy it can follow is one of reduction of public finances. The Growth and Stability Pact aims principally at reducing the role of the public sector in euro-land by sanitising the Member States' public finances. The public sector levied more than 50% of GDP of the euro-zone, as compared to about 40% in the United-Kingdom and 35% in the USA. Furthermore, public administrations are less inefficient in some countries of euro-land : some countries such as Belgium, Greece and Italy rank high on Transparency International's scale of corruption, precisely those countries have accumulated the highest levels of public debt . Swedes spend about 52% of their GDP on public expenditures, but their budget has the highest surplus among the EU members (+ 4.6% of GDP) and the country ranks - like other Scandinavian countries - among those with the least corruption.  

What is worse, however, is that even this limited set of economic policies is not respected by the most eminent members of euro-land. So, if these members refuse to change their « national particularities » for the common good, why would Swedes want to change theirs. The negative vote of the Swedes can be deplored but the member countries of euro-land only have to blame it to themselves : the expected gains from market liberalisation are balanced by the insatiable appetite of national bureaucracies. Citizens of euro-land needed Swedes to joint to help them reorganise euro's public finances.

The absence of logic in the economic governance of the EU has again recently been publicly exposed by the decision of fiscal harmonisation and Italy's or Belgium's measures to « repatriate » capital held by nationals abroad. First, the fact that the decision hinged on an agreement about Italian milk quotas, exposes the aberration of the persistence of unanimity voting in this matter. Secondly, these policies ignore the freedom of circulation of capital among EU member countries and the need for citizens to enjoy free competition among capital investments to force national governments to improve their budgetary policies. No wonder that before the Swedes, the Swiss also refused to join the EU and abandon the principle of bank secrecy, written into their Constitution to protect them against the overwhelming power of public administrations.

All considered, one should congratulate the 44% of the Swedes who voted in favour of adopting the euro and joining a group with lower economic growth, higher unemployment and less efficient governments. The positive aspect of this vote is this high percentage in Sweden of genuine European citizens.  

Their dilemma will be to convince their compatriots and government to support further European integration and eliminate the bottlenecks to faster economic growth in euro-land. The dilemna then will be to accept even less national sovereignty by better economic conditions, or more national sovereignty and less efficient economic governance.  

Will Europe follow a virtuous or vicious course : that is the question.  



            Jean-Jacques SCHUL