Adopting the euro

In his letter (February 26), Remig Sacco claimed that "the Swedish electorate would not vote to sacrifice their public services, their country's economy, nor their progressive welfare system for euro entry" and at the same time he admitted that the country's business elite and the majority of the trade unions campaigned for Sweden's entry into the eurozone.

From the above statement, one can only infer that the business community and trade union members in Sweden have a peculiar self-destructive nature and were determined to bankrupt the country when they advised the adoption of the euro.

It may be worth noting that most of the countries in the eurozone have some of the best public services and welfare systems in the world which are in no way threatened by the new currency. Apart from an outstanding public service system, Germany, for example, has a social security structure that is the envy of the world.

Admittedly, some of its social provisions are costly and verge on luxury, something which the country can ill-afford and is now attempting to trim down. Notwithstanding the heavy social burden, in April of last year Germany for the first time surpassed the US in exports to the rest of the world. The European Union economy now is running trade surpluses as proportionately big as the US trade deficits.

Countries in the European Union are very protective of the social benefits enjoyed by their citizens. When some time ago a Dutch minister was asked whether the European social contract should be replaced by a less expensive but less caring one, like the Thatcherite model, his reply was blunt: "We do not wish to go back to Dickens's times".

When the process of decimalisation in Britain was completed, prices in the shops went up, albeit by a small amount, and the same happened in the countries that adopted the euro. This small rise has nothing to do with decimalisation or the introduction of a new currency. Shopkeepers and business people take advantage of the change to round up their prices. Prices in the eurozone are still lower than in the other areas in Europe.

Mr Sacco's experiences in the eurozone countries are in sharp contrast to those of the British eurosceptic, ex-Conservative minister Michael Portillo, who went on a tour to different euro countries to interview ordinary people and test their reactions to the introduction of the euro.

To his embarrassment and poorly concealed astonishment, he could not find a person who spoke against the adoption of the new currency. He was gently rebuffed by some who found it difficult to understand his opposition to European integration. I have myself travelled to Spain, France, Austria and Italy and found a positive attitude towards the use of the new currency.

In September, 2002, the British trade unions voted by a wide margin in favour of Britain joining the euro as soon as the five economic tests set by the treasury have been met. Hardly a month passed after the voting and the BBC announced that the Massey Ferguson plant closed down in Britain because the country was not in the eurozone and Toyota decided to build an engine factory in France instead of Britain for the same reason.

There is ample evidence that the UK's share of new inward investment has been falling and at the same time investment is rising in the eurozone. In the three years since the single currency was launched, Britain received 15 per cent of total cross-border investment in the European Union as against an average of 25 per cent in the two years before the launch. This corresponds to several billion pounds of lost investment. As a result, the manufacturing base is shrinking and the economy is being sustained to a large extent by overspending by consumers who are running large debts; hence the rise in Bank of England interest rates to four per cent to curb spending against the two per cent interest rate in the eurozone.

An analysis of the reasons why citizens in countries like Sweden or Denmark rejected the euro, in spite of recommendations to the contrary by politicians, business people and trade unions, shows that people's objections had little to do with economic realities and were prompted by caution, familiarity and misplaced pride with one's currency, and perhaps an instinctive desire to upset the establishment.

In recent months the euro has hit record highs against the dollar and other currencies and is much stronger than at its creation. It has now an international fan club with countries like Russia, China, Canada, Malaysia, Japan and others shifting their portfolios towards the European currency. The "safe haven" status has been gained by the euro at the expense of the dollar and European investors have added to the consolidation of the single currency by repatriating their funds from the US markets.

Since January the eurozone economy has shown signs of recovery and if the euro, guided by the European Central Bank, gains further credibility, there is little doubt that those European countries still undecided will in future adopt the single currency.