Swedes poised to reject euro

Swedes look set to vote against joining the euro in a crucial referendum this Sunday.

    The Swedish economy is one of Europe's most prosperous

    Two major opinion polls

    on Tuesday put the "No" side lead at 11 percentage

    points with just days to go before the vote.

    Another poll showed the "No" side's lead widening slightly

    just when euro supporters need to persuade the many

    waverers to give up the krona.

    But as campaigning hit fever pitch, Prime Minister Goran Persson

    insisted victory for the "Yes" side was still possible

    .

    Euro supporters pin their hopes of Sweden becoming the 13th

    member of the single currency on politicians and

    business leaders drumming up late support.

    Eurosceptics

    But opposition to the euro is being shored up by fears it

    might put at risk Sweden's generous welfare system

     and

    political control over its prosperous economy.

    Euro sceptics have led the polls since April, although the gap

    has narrowed slightly since then.

    Persson hopes for a repeat of Sweden's

    1994 referendum on EU membership, when the undecided turned

    pro-EU late in the game.

    "This will be an extremely close race. I have said that all

    the time. And many, many voters will decide on the last day of

    the week," said Persson as he cast an early postal vote.

    Mistrust 

    But Ulla Hoffman, head of the anti-euro Left Party, said

    : "People trusted the politicians in 1994 but they won't

    trust them this time."

    Many Swedes express concern about delegating policy to the

    European Central Bank when their economy has been performing

    better than the euro zone.

    "The economic fundamentals show that

    Sweden is doing quite well out of EMU," said a Deutsche Bank

    report.

    In the second quarter of 2003 Sweden's economy grew 1.3%

    year-on-year versus euro zone growth of 0.2%.

    Euro zone recession

    Meanwhile, Europe's beleaguered economy is close

    to recession, data confirmed on Tuesday.

    Persson (L) hopes undecided
    voters will swing the result

    But officials forecast the

    12-member euro zone will pull back from the brink over the next few

    months.

    The European Commission, battling to persuade key euro zone

    states to respect strict budget rules, described

    the new figures as

    disappointing.

     

    According to the European Union, gross

    domestic product in the zone sharing Europe's single currency

    contracted by 0.1% in the second quarter after stagnating in

    the first.

    Interest rates cuts

    The downward revision has dashed any hopes of a strong recovery

    and highlighted the need for further interest rate cuts, economists

    said.

    "Our view is that the ECB (European Central Bank) will need to

    deliver more in the way of rate cuts by the spring," said Lehman

    Brothers economist Michael Hume.

    "It is clearly not in the mood to cut rates at the moment, but

    that can't last."

    The figures

    put the bloc dangerously close to

    a recession, defined as two consecutive quarters of economic

    contraction.

    Recovery 

    But the commission, the EU's executive arm, forecast the economy

    would pick up in the third and fourth quarters, predicting GDP

    growth of 0-0.4% and 0.2-0.6% respectively.

    "The acceleration in growth predicted for the fourth quarter

    stems from the recent improvement in domestic retail confidence, as

    well as external factors," said the EU executive in a statement.

    Hume commented on the downward revision by saying: "The numbers

    were pretty dreadful but didn't contain much in the way of

    surprises.

    "The domestic side was a bit weaker, so that was a bit

    disappointing as it suggests that the recovery - and I do think we

    are seeing a recovery - is still too much dependent on the recovery

    in the US and to some extent in the Far East."

    SOURCE: AFP


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