In or out? Euro debate swirls without Danish input
Last week the euro was given a lifeline. Should Greek voters agree on a referendum to accept a debt package forged by the 17 Eurozone leaders last Thursday, it is thought that the common currency will enter a new era of increased co-operation and stability. Should they reject it, some analysts predict it will be the death knell of the common currency.
But not everyone who has a stake in the future of the euro has their voice heard at the negotiating table.
While Danish voters have repeatedly voiced their support for keeping the krone, its value is pegged to the euro and follows its fluctuations on the currency markets. Decisions made about the future of the euro will ultimately affect the krone, and yet PM Helle Thorning-Schmidt was not given a place at the table.
Following last week’s meetings, an editorial in Politiken newspaper argued that Denmark could no longer afford to remain in self-imposed exile.
“The strengthened co-operation between the euro countries demonstrates Denmark’s long-term problem by standing outside the common currency,” the paper wrote. “No euro, no influence.”
Denmark’s special relationship with the euro began in the early 1990s when it was allowed to opt out of the common currency after negotiating the Edinburgh Agreement. But even then, Danish decision makers realised how important the euro would be to the country’s economic stability. So Nationalbanken participated in its planning to ensure price stability and an effective exchange rate co-operation between euro and non-euro states.
With the krone’s value set closely to the value of the euro through the European Exchange Rate Mechanism, their fates on the currency markets are intimately tied – if the euro does well so to does the krone. And in many ways the euro has done well. As the debt crisis kicked in, the common currency prevented Eurozone members from competitively devaluing their currencies to cheapen their products on the export market, a measure which could have destabilised economies across the continent.
The basic premise for introducing the euro was that it would remove barriers between European economies and increase trade and investment across the continent. And it is generally accepted to have worked, with some figures showing that trade and investment across Europe increased by five percent after its adoption.
While the Danish PM gets a place in the room, the country’s refusal to adopt the euro keeps her from the negotiating table (Photo: Scanpix)
But joining the euro would not be without its sacrifices. Eurozone members must abandon unilateral monetary policies for a common policy set by the European Central Bank (ECB).
Eurozone members enjoy a say in policy making, but Denmark is excluded from these discussions despite the fact the krone is pegged to the euro.
According to John Bo Northroup, the managing editor of the weekly financial newsletter Øknomisk Ugebrev, Denmark is in an unfortunate situation in which its monetary policy is being determined externally without it having a say.
“We obey all the rules but we don’t have any political influence. We saw this in the aftermath of the crisis that Danish officials and politicians were physically excluded from the negotiations,” Northroup said.
“This came as a shock because so far Danish politicians have been used to being in the room during negotiations and they are used to knowing what’s going on. But now we lack any political influence.”
The problems of Denmark’s outsider status have long been discussed. The former prime minister, Anders Fogh Rasmussen, explained to Bloomberg in 2008 that by not adopting the euro, Denmark had damaged its interests.
“De facto, Denmark participates in the Eurozone but without having a seat at the table where decisions are made, and that’s a political problem,” Rasmussen said. “It’s a loss of influence and is in contradiction with basic Danish interests, and this is the reason why I would like to abolish the euro opt-out.”
Even though Denmark would stand to gain influence by adopting the euro, opponents say giving up the krone and handing over formal authority on monetary policy to the EU will do little to benefit Denmark.
“I think they’re wrong,” Rina Ronja Kari from anti-EU group Folkebevæglsen Mod EU said when asked whether she agreed with the views of experts who think Denmark would be better off with the euro.
“I think it would be stupid to join as it stands now. [The German chancellor] Angela Merkel is basically in charge of the European economy so even if we did join now and get a voice it would only be a small voice. We would lose a lot of influence over our own economy.”
According to Kari, the solution is for Denmark to disconnect the krone from the euro and allow it to float on the currency markets like the Swedish krona. Denmark would still be able to trade and co-operate with the rest of Europe, though completely on its own terms.
If the Eurozone countries develop a tighter union, will Danmark be left out in the cold? (Illustration: Aviaja Nielsen)
“The krone is connected to the euro but we could choose not to be,” Kari said. “That would change the power structure and bring us more influence over our own economy.”
Kari is not alone in wanting to return economic sovereignty to Denmark. The continued debt crisis in Europe has contributed to surging anti-euro sentiment. A poll published by financial daily Børsen in October found that 65 percent of adults were opposed to adopting the euro. Traditionally the split is closer to 50/50.
But while Danish voters may want to keep the krone, almost all of their major political parties support its adoption. Ever since the 2000 referendum on joining the euro was defeated, a second referendum has been discussed yet never materialised.
But how could the euro enjoy so much political support without it being reflected in public opinion? According to Northroup, business leaders share some of the blame.
“In Denmark the popular perception of the euro is delinked to the business perception,” Northroup said. “Danish business leaders are rather anonymous and don’t take part in the everyday political and economical debate. If we had more of these figures explaining how these things worked together and their impact, it might affect popular opinion.”
Peter Nedergaard, a professor of political science at the University of Copenhagen, agreed that the benefits of European co-operation were not adequately explained.
“In general I think most people in Europe don’t realise how affected they are by EU decision-making,” he said. “And that goes for environmental policy, internal market policy and decisions about the Eurozone. It doesn’t matter what it is, people don’t realise we are already like a federation when it comes to these proposals.”
Nedergaard also agreed that Denmark would benefit in the long-term from joining the euro.
“In the short-term we would benefit from not being part of the euro, but on the other hand the EU is not a game that is played once, it is a continuing game. And if you are disloyal in the short-term you will lose influence in the long-term.”
If Denmark did join the euro, the benefits could include better transparency to foreign markets, a decrease in interest rates and, most importantly, a seat at the table when European economic policy is decided.
But membership would come at a price, with Denmark having to stump up money to support the European Financial and Stability Fund (EFSF) to the tune of several billion euros.
The question voters will have to answer is whether that’s a price they want to pay to have even a small voice at an increasingly important table.
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