BUSINESSWEEK ONLINE : OCTOBER 2, 2000 ISSUE
INTERNATIONAL -- EUROPEAN COVER STORY Denmark: The Vote That Could Roar (int'l edition) Patrons at the famous Copenhagen pub Toga Vinstue are used to a hefty dose of politics with their beer. But even they were surprised to see former Central Bank Governor Erik Hoffmeyer tending bar on a recent night. Hoffmeyer, popular after he helped revive the country's economy in the early 1990s, was there to campaign for a ''yes'' vote in the closely watched referendum, scheduled for Sept. 28, on entry into the European Monetary Union. Danish sentiment concerning autonomy and nationalism will determine the outcome. But the vote now has significance beyond old European rivalries. As the euro plunges to new lows, commentators have been telling the Danes that their votes could affect the future of the single-currency project. If Denmark rejects EMU, so might Britain and Sweden, the other holdouts. Worse, a resounding ''no'' vote could start another downward spiral for the euro, as investors' doubts about the currency's political support grow. CLOSE CALL. The latest Gallup poll puts the ''no's'' ahead, 48% to 37%, though other surveys show the race as too close to call. Along with most of the Danish Establishment, Hoffmeyer argues that it would be foolish for the tiny country to reject the single currency. Denmark's economic fate, he points out, is closely linked to the European Union, whether it formally joins EMU or not. To stay out of the single currency dooms Copenhagen to a diminished voice in Brussels. ''Do we really want to have a Europe totally dominated by one country--namely, Germany?'' he asks. The ''no'' campaign, led by a coalition of opposition parties and nonpolitical groups, turns that argument on its head. ''It is a myth that Denmark will have influence in the EU if we join the EMU,'' says Knud Erik Hansen, a member of Parliament from the Socialist People's Party. He and other critics say that under EMU Denmark will lose the freedom to set its own policies in such areas as labor and social welfare. The Danes may not like the outcome, no matter which way they vote. The likelihood of a ''no'' vote has led traders to pound the Danish krone, whose value is linked to the euro, down to a record low of 8.7 to the dollar. The central bank's discount rate has risen from 3% a year ago to 4.5% today, and rates are likely to rise further with a ''no'' vote. The international repercussions could be huge. If the Danes reject EMU and influence the British to do the same, that would cause sterling to rise, disrupting its recent close correlation with the euro. A strong, export-killing pound is not what the British want right now. Britain vies with France for position as Europe's second-largest economy, and manufacturers have been feeling the pinch of a stronger pound. The average Briton dreads the euro and would take heart from a Danish rejection. Prime Minister Tony Blair would like to hold a referendum on the single currency early in the next Parliament--assuming he wins the general election, which must be held by May, 2002. Roger Mortimore, senior political analyst with the MORI polling organization in London, says a Danish ''no'' would have ''a big effect on the morale of the [British] anti-euro groups and frighten Blair as well.'' In Sweden, the Danish decision is expected to have a more direct impact, and a ''no'' vote could keep Stockholm out of the single currency for a long time. Swedish opposition to the euro and to membership in the EU is growing because Swedes resent the Brussels bureaucracy. Pro-euro forces are campaigning hard to get the Danes to change their minds, with Prime Minister Poul Nyrup Rasmussen leading the charge. A ''yes'' could dramatically boost confidence in the hard-pressed euro and ultimately bring Britain and Sweden in as well. The Danes, for once, have all Europe watching. By Ariane Sains in Copenhagen _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Euro Crisis (int'l edition) COVER IMAGE: Euro Crisis -- Here's a Way Out TABLE: Unfinished Business TABLE: Europe's Reserves CHART: Shadows over Europe Europe's Cash Is Flooding into the U.S. (int'l edition) CHART: Europe's Money: America-Bound Denmark: The Vote That Could Roar (int'l edition) INTERACT E-Mail to Business Week Online

Copyright 2000-2009, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use   Privacy Notice