By IPS Correspondents
BRUSSELS, Sep 15 2003 (IPS)

Sweden’s decision to reject the euro has sent ripples if not waves through the European Union.

With a turnout of 82.1 percent Swedes voted Sunday 56.1 percent to 41.8 percent against the euro. In all 3.2 million Swedes said ‘no’ to the currency, compared to 2.3 million who voted in favour.

Swedish voters were the first to hold a referendum on the euro since the single currency came into circulation in January 2002 in 12 of 15 European Union (EU) countries.

Their rejection of the new currency means that Sweden joins Denmark and Britain in remaining outside of the euro zone, leaving the EU increasingly divided on the subject.

The referendum was largely overshadowed by the killing of Sweden’s foreign minister Anna Lindh, the main face of the "yes" vote last Thursday.

Speaking as the result was announced Sunday evening, Swedish prime minister Göran Persson said the message was clear and would be "very easy to respect," adding: "There is deep scepticism to the whole EMU (European Monetary Union) project among the Swedish people."

The European community in Brussels expressed its disappointment over the result.

In a statement Monday the European Commission (EC), the executive arm of the EU, said that it acknowledged Sweden’s rejection of the euro, but quickly highlighted the advantages of the currency.

"We firmly believe that the euro, our currency, has brought and will continue to bring advantages to the euro area economy. The euro has provided much needed stability in the individual member states’ economies and has created an appropriate springboard to make Europe the most competitive and socially cohesive area in the world," it said.

It also said that Sweden had missed an opportunity to influence European politics.

"Its full impact has still to work its way through to the euro area economy and that is what we are in the process of achieving together," the EC said. "Sweden could have influenced this effort by deciding to join the euro."

In a statement to the Italian press in Bologna, Italy, EC president Romano Prodi went further, saying Sweden would lose influence in Europe.

The Swedish result also bodes badly for the European bloc as it plans an ambitious new constitution for the EU next year which has to be ratified by all member states, including 10 new member states.

The effects of Sweden’s rejection of the euro were also felt in Britain, which was considering holding a referendum on the subject in the near future.

Many experts now say that the Swedish decision effectively banishes any prospect of British Prime Minister Tony Blair holding a euro referendum before the next general election.

European Liberal Democrat leader Graham Watson who campaigned for a "yes" vote in Sweden said that the British government should learn from the Swedish experience.

"Sweden has voted no to joining the euro because the Swedish government has failed to inspire people about the wider benefits of European unity. Arguments of potential economic benefits have not convinced the Swedish people. There is a lesson here for Tony Blair," he told IPS.

"Continued self-exclusion from the euro will bring a crushing loss of investment and political influence and increased vulnerability to money market turmoil," he continued. "Eventual membership of the euro is however almost inevitable for Sweden, as it is for Britain and Denmark."

The "No" campaigners in Britain – the biggest EU country remaining outside the euro – claimed the result highlighted the huge difficulty that the government would have winning a vote in Britain, where opposition is even higher.

George Eustice, campaign director of the UK "No" campaign told IPS: "The only two countries to be given a vote on the euro have rejected it. People in Sweden can see the problems in the euro zone and they do not want to give up control of their economy and accept lower growth and higher unemployment."

Britain’s shadow foreign secretary Michael Ancram backed this view.

"The bulk of the media and political parties in Sweden were arguing for the euro. Despite that, Swedes have chosen not to give up their currency and not to adopt a one-size-fits-all interest rate," he told the BBC.

"It is clear that being out of the euro will not leave Britain isolated in Europe. Blair’s euro campaign is now severely damaged. No one can argue any more that the euro is inevitable," he said.

However, in a statement Monday leader of the House of Commons Peter Hain insisted that the Swedish result would have little influence over the British decision, saying that a decision on calling a referendum over British entry would be based only on Britain’s economic interests.

In Denmark, which rejected the single currency three years ago, Prime Minister Anders Fogh Rasmussen insisted that the result would have no impact on whether the Danes voted again. – Danes will make their decisions completely independently of what has happened in Sweden," he said.

Rasmussen aims to lead his country into the euro zone before the end of his premiership.

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