Swedish PM Blames Big Economies for Euro Weakness

Swedish Prime Minister Göran Persson has found a scapegoat in the event his countrymen and women vote against introducing the euro in two weeks. The Social Democrat lashed out at Germany, France and Italy for preparing poorly for the euro and damaging the eurozone economy.

"If they had behaved as Sweden, Finland, the UK and others during the 1990s, preparing their economies for the downturn, we should not have had this situation today," Persson told the Financial Times.

France, Germany and Italy make up around 60 percent of the eurozone economy.

Persson may be cobbling together a program of damage control in the event that Swedish voters reject the euro in a referendum on September 14. Right now, the "no" votes have a comfortable lead, although there are still many undecided voters. Though his cabinet has been divided on the issue, the Prime Minister has not wavered in his support of the euro.

But the Swedish "no" camp, which has been in first place for months, has seized on the sluggish economic performance of the eurozone's largest economies to bolster its case against the euro. They say Sweden would be better off sticking with its present currency, the crown.

Problems compounded

Persson's worries have been aggravated by reports that both France and Germany are expected to breach the European Union's budget deficit ceiling of 3 percent of GDP for the third consecutive year in 2004. The limit, part of the EU Stability and Growth Pact, was introduced to protect the euro. The French government announced on Monday that its budget deficit would reach 4 percent.

Berlin reckons on a deficit of 3.8 percent this year, while German Finance Minister Hans Eichel has expressed confidence that the country will not overshoot the 3 percent mark in 2004. But German central bank head, Ernst Welteke, contradicted the optimistic finance minister on Monday. He said the German economy's persistent weakness meant the country would likely not be able to reduce its public deficit below three percent of GDP in 2004.

With the new figures from Paris, the European Commission expects the eurozone as a whole to have a deficit of at least 3 percent, a spokesman for EU Commissioner for Economic and Monetary Pedro Solbes said on Tuesday.

Damage control

The Stability Pact may be the key to allowing euro-fan Persson to limit the damage if the Swedes say "no" to the euro. He suggested on Friday Sweden could delay introducing the common currency -- planned for 2006 -- even if a majority of Swedes vote for it in the referendum. A "functioning Stability Pact" was a prerequisite for launching the euro in Sweden, he said in an interview.

A poll published by the Swedish polling institute SKOP on Tuesday showed that 49 percent of Swedes were against the euro and 39 percent in favor of its introduction. Twelve percent were still undecided.

Persson is banking on this last group voting yes. "We know from the EU referendum in 1994 that 32 percent decided how to vote in the last week. It gave a net contribution to the 'yes' side of five percentage points. This time even more people will decide late because the issue is more complicated," he told the Financial Times.