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Where Denmark Leads
By Helle Bering, editorial page editor of The Washington Times.
The Wall Street Journal Europe 2000-09-27

The European Union numbers well over 300 million people, yet somehow it always seems it's the 5 million Danes who manage to be the troublemakers. In 1992, Denmark sent a wave of doubt over the European Union when it rejected the Maastricht treaty - only to accept an amended version of the treaty the following year.

Tomorrow, the Danes are poised to produce yet another cliffhanger when they vote on whether to approve membership in the European Monetary Union, adopting the euro in place of the national currency, the krone.

This is a question whose implications go well beyond how the Danes will count their comfortable salaries. Because of Denmark's regular resort to constitutional referenda - more common than in most European countries - the country not only regularly takes its own temperature in relation to the EU but also capture swings in public opinion across EU borders.

A "Yes" vote would be a vote of confidence in the movement for greater European integration.

A "No" vote could well send the already ailing euro plummeting to new lows; influence decisions by the government of Britain and Sweden on whether to hold referendums of their own on adopting the euro; and seriously complicate constitutional discussions meant to pave the way for EU enlargement.

The changing dynamics of the polls have in large part resulted from the increasingly nasty and desperate edge taken on both sides of the campaign, in a positively unDanish fashion - which is about the worst insult normally polite Danes can fling at each other. Scaremongering by the extremist Communist-Nationalist coalition that has formed to oppose the euro includes the charge that the cherished social welfare state will be destroyed by "those people down there in Brussels."

For its part, the Social Democratic government, which has led the Yes campaign in coalition with all the major center parties and business elites, has suddenly increased its estimates of potential job loss in the event of a No vote to 20,000 from 5,000 and upped the costs to the Danish economy in lost investment to $2.5 billion. These figures contradict a report produced in May by the so-called Danish wise men, who said that the "issue was linked more to political considerations than economic factors."

A look at the campaign for and against, however, reveals a fairly common state of affairs when it comes to European integration. The economic arguments for adopting the euro are clear. Yet the emotional arguments - centering on loss of national independence and Denmark's unique national characteristics - hold great power.

The euro itself. The most potent weapon for No-voters in recent weeks has been the seemingly unending decline of the euro against the dollar. The currency has lost more than a quarter of its value since its introduction in January 1999, a weakness that was only underlined by last week's intervention by central banks. Under these circumstances, it's not strange that the Danes are nervous.

Yet it is a fact that the Danish krone remains tied to the German mark in a currency band and therefore to the euro. Any prime-rate change made by the German Bundesbank is shadowed by the Danish central bank within minutes.

Pro-euro advocates point out that the Danes might actually have more control of their own money inside the eurozone than out, with a Dane on the board of the European Central Bank. And as Prime Minister Nyrup Rasmussen told me earlier this summer, "In the event of a No, we have no intention of abandoning the fixed-exchange rate. However, the demands on our fiscal policy could be severe in order to calm the financial markets." Accordingly, the krone itself is weaker against the dollar than at any time since the early 1980s.

The welfare state. The great welfare scare has undoubtedly been the most effective piece of anti-Europe propaganda disseminated by Denmark's euro opponents -- and the most bungled of the government's defensive actions. Denmark, so the argument goes, would lose control over its social spending if it adopted the euro, and therefore its prized social pension system. Not surprisingly, this sent the senior vote stampeding in the No direction.

In truth, there is no actual indication that adopting the euro would force a change in Danish government policy; Denmark's budget deficit is well within the bounds specified by the Maastricht treaty. Unfortunately, the panicked reaction of the government did not help at all. The prime minister took the extraordinary step of promising to keep social security at its current levels until the year 2045 - a pledge that even the most ardent euro-supporters were hard-pressed to believe. The result was a massive loss of credibility.

The womens' vote. Interestingly enough, the faultline in the euro debate has fallen strongly along gender lines, with women overwhelmingly opposed. Why women should be more attached to the national Danish currency than men certainly seems odd. It is undoubtedly true that the scare campaign on welfare worked on women as well seniors. Women are also more likely to be concerned about the effects of immigration and the loss of national independence, issues that are identified as "emotional."

On balance, Denmark's economic interests are best protected within the European Union, and at the center rather than at the periphery. Yet those who favor greater European integration still have to answer an important question, the very one that is at the heart of the Danish ambivalence.

Beyond the general idea of integration, what is the political project that goes along with the common European currency? In May, German Foreign Minister Joschka Fischer called for "integration in a European Federation" as the last step of the EU's evolution. And yet the French presidency of the EU has been reluctant to raise expectations that important constitutional questions can reach a resolution at the December ministerial meeting in Nice. "Just any agreement will not do," French Foreign Minister Hubert Vedrine wrote recently in the Financial Times.

The Danes are right to demand an answer to the question, "Where will this lead us?"

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