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Danes decide
FT-leader, September 22

Last time the European Union refused to take no for an answer from Denmark. Within a year of voting down the Maastricht treaty in 1992, the Danes were badgered by their EU partners into reversing their verdict in another referendum. If, as looks increasingly likely, the Danes vote against joining the euro, they will be left alone.

Whereas Denmark’s No vote eight years ago risked torpedoing the whole euro project, a negative vote next week would technically only confirm Denmark’s position outside the single currency. Yet a No vote would have baleful consequences for Denmark and the rest of the union, going beyond the likely further knock to the euro’s international value.

The Danish referendum campaign has shown how hard it is to sell the euro to voters on economic grounds alone, when their economy is in robust health. Denmark has surpluses on its current account and budget, and more people in work than ever before. Its trade with the euro-zone is vital. But this is protected from exchange rate fluctuations because Denmark has kept the krone moving in lock-step with the euro, just as it did with the D-Mark for the previous 18 years.

A No vote next week is unlikely to sap Copenhagen’s will or capacity to continue this policy, though it may raise the interest rate premium for Danish borrowers. Precisely because of this, Danes should ask themselves what is the point of being de facto members of the euro-zone, if they still have to pay this interest rate penalty for not being full members of the euro-zone.

The No campaign has fanned fears of a levelling down of Danish welfare standards to those of other euro-zone members. More plausible is a levelling down of Danish prices through the way that price transparency leads to price convergence within a currency union. But these economic arguments are only half the point. The government should have conceded from the start that the euro project is ultimately political, and argued that it needs full Danish participation to try to shape it.

Danes recoil at the idea of rule by a remote superstate. But that is not what is being created. Denmark could regain a bit of its monetary sovereignty by joining the European Central Bank which is in some ways less secretive and more accountable than its own national bank.

A Yes next week would extend the euro-zone to include an economy that has already converged with other single currency members.

A No would increase the chances of delay or defeat in forthcoming Swedish and British referenda on the euro. It would ironically entrench a new monetary division across Europe, just as EU enlargement begins to close the cold war dividing line between east and west.

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