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Wednesday, September 17, 2003

Swedish Waves

Sweden's no to the euro continues to make waves ( and here and here ). Much of the consensus seem to focus on when there will be another vote. Little seems to contextualise in relation to next years 10 new members. There is also not much comment on how the new alignment post-May 2004 will impact on the post-Iraq war differences. Blogger Abiola Lapite has a rather different take on the situation, focussing on how the abuse of power by the large states (and for another more recent example not mentioned by Abiola see this ) maybe affecting perceptions of the EU in the smaller states. Apart from the monetary and fiscal issues, the abuse of large-state power and the bickering over the pact (with the impression often being given that the rules can be rigged, that it's just a question of finding the right formula) undoubtedly took their toll in the Swedish vote. But somehow I doubt that this lesson will be learned.

What a surprise! And what I found even more surprising was the margin of victory - a huge 14.3%. I'd been expecting the pro-Euro camp to ride to victory on the back of the sympathy factor, what with all the press coverage that made Anne Lindh out to be the second coming of Mother Teresa, but it seems I underestimated the Swedes' ability to separate their feelings of grief from hard-headed calculations about the best choice for their country.

None of the arguments made on behalf of joining the Euro made any sense, whether considered from an economic or a political angle. The claim that the Euro would bring big economic benefits was never plausible on its' face: the EU is very far from being an optimal currency area, and income flows on the scale that would be required to counterbalance any asymmetric shocks to Eurozone countries are simply politically unimaginable anytime in the near future. Labor mobility is extremely low, even within most European countries, while the linguistic barriers are such that the only direction in which labor could easily flow would be towards the UK and Ireland, because of the demands by employers in even the smallest countries that all employees speak the local language fluently. Can anyone reasonably imagine a day when the Danes, the Dutch or the Portuguese would agree to the adoption of German or (most likely) English as the official working language within their own borders?

But even leaving aside the language issue for the moment, there is still the fact that academic credentials are not automatically recognized or correctly evaluated outside of the countries they are issued, that legal and professional standards differ across all EU countries, that moving from one country to another often means losing all your pension contributions, and a host of other imperfections in the labor market that ensure Europe will not be looking like America, where moving from one coast to another is a routine matter, anytime soon.

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