In spite of mixed signals, 56.1% of Swedes rejected the adoption of the single currency. A mere 41.8 % voted in favour. Contrary to the predictions, the murder of foreign minister Anna Lindh did not affect the outcome dramatically to the advantage of the Yes campaign.
Yet to understand the failure of the referendum, we must look not to the performance of the No campaign, but instead appreciate the general distrust of the political establishment - and by extension, the entire EU project. The government and its pro-Euro business allies had thrown in everything, spending far more money than the other side. The result is a big blow to Swedens political and economic elite.
Goran Persson, who has suffered a heavy loss of political prestige, emphasises the long term costs of staying out: less influence for Sweden in the EU and less inward investment due to exchange rate uncertainty. Swedish EU commissioner, Margot Wallstrom, has blamed Mr. Persson for the difficulty in convincing Swedes that the Euro is a good idea when the government itself is split. Furthermore, as opposed to Denmark and the UK, Sweden has no formal exception to opt out of the single currency. In approving EU membership by a narrow margin in 1994, Sweden legally bound itself to the EMU. This has put the country in a legal and political dilemma.
Voters doubted whether it was in Sweden s economic interest to join the Euro. On one hand, Sweden's economy, characterised by a huge public sector and a relatively inflexible labour market, is arguably better suited to an independent monetary policy. On the other hand, a small and open economy should reap greater benefits from a fixed exchange rate in relation to its major trading partners.
To hold the referendum when much of the Eurozone was in recession was perhaps not the best timing. Comparing economic development in Sweden and the Euroland since the introduction of the Euro, Swedes are right in questioning whether it will deliver greater benefits. Euro membership may become more attractive in the future, but Euro-sceptics worry that the ECB will focus on Europe's core (France and Germany) and that monetary policy would be determined by their needs to the disadvantage of the periphery. A pointed finger has already been raised towards Berlin and Paris for breaching the deficit ceiling of the Stability Pact. Retaining national control over monetary policy and interest rates, Swedes hope to maintain their low interest rates, lower unemployment and higher growth than the Eurozone. Before taking any risks, the majority want to stick with what they have and wait and see.
Since Sweden became a member of the EU in 1996, the political parties on the Yes side have been unsuccessful in their attempts to curb the existing scepticism against the EU. The opposition to the Euro reflects a more deep-rooted scepticism towards the EU; often accused of being bureaucratic, corrupt and inefficient. Sweden doesnt share the same recent historical experiences as the rest of continental Europe, having been spared from the atrocities of the two World Wars. There also remains a widespread nostalgia over the welfare state, and many Swedes worry that deeper integration will eventually threaten to dismantle the system. Before joining the EU, many Swedes perceived their country to be above rather than outside the rest of the continent.
The victory for the No side can only be interpreted as a sign that people want to prevent cooperation between Sweden and the EU from deepening further. Winning support for the adoption of the Euro might have been easier if the two issues had been kept separate if the government had promised a further referendum on the new European Constitution, for example. Sweden's political leadership must now contemplate how best to create a proper debate on our cooperation with the EU, a debate in which voters and politicians must be on the same wavelength. This is even more difficult now that Sweden has lost a popular leader who had the power to reach people with her vision of a united Europe. The Euro is an integral part of a wider political project and this unique opportunity should have prevailed over short term economic gains. The country should stand up for the solidarity which its society claims and participate whole-heartedly in European integration. The result will not stop this process, but may temporarily harm it.