Euro nightmare: Single currency ‘almost crushed Sweden’s economy and political system’

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Sweden, which avoided a lockdown during the height of coronavirus earlier this year, saw its economy shrink 8.6 percent in the April-to-June period from the previous three months. The estimate from the Swedish statistics office reveals that the country has fared much better than other EU nations. The European Union saw a contraction of 11.9 percent for the same period.

Individual nations did even worse, with Spain seeing an 18.5 percent contraction, while the French and Italian economies shrank by 13.8 percent and 12.4 percent respectively.

Nordea bank chief analyst Torbjorn Isaksson said: “It is, as expected, a dramatic downturn.

“But compared to other countries, it is considerably better, for instance if you compare to southern Europe.”

Sweden could have found itself in a worse situation had the country joined the euro area, though.

In 1995 book “The Rotten Heart of Europe,” British economist Bernard Connolly recalled how the monetary union almost destroyed the nordic country in the Nineties.

He wrote: “Sweden had not joined the European Rate Mechanism (ERM), but foolishly pegged its currency to the European Currency Unit (ECU).”

The ECU was the official monetary unit of the European Monetary System (EMS) before it was replaced by the euro.

The value of the ECU was used to determine the exchange rates and reserves among the members of the EMS, but it was always an accounting unit rather than a real currency.

Mr Connolly continued: “Sweden had undertaken a period of rapid financial liberalisation and credit expansion.

“When the country was hit by the perverse mechanism just related, it’s banking system foundered.

“Indeed, it was the incipient collapse of the banking system that forced the country’s central bank to abandon its ‘shock-and-awe’ attempts (including raising overnight interest rates to 500 percent) to avoid being forced off the ECU beg.

“The decision to abandon the ECU peg saved Sweden’s financial system and its economy and arguably also saved its political system.

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“It was only because Sweden could allow its currency to depreciate very sharply (much to the annoyance, and worse, of France in particular) that growth could resume, making it feasible for the government to recapitalise the banking system without bankrupting itself.”

Mr Connolly concluded: “At all events, Sweden has since never looked back.

“An attempt by the political class to do so and join the monetary union was resoundingly defeated by the Swedish people in the 2003 referendum.”

Britain could have also joined the euro, had former Prime Minister Tony Blair succeeded in his bid.

In an exclusive interview with, Lord David Owen exposed Mr Blair’s obsession with taking the UK into the monetary union while serving as Prime Minister.

The former Foreign Secretary and SDP co-founder said: “The EU will come unstuck in a big way and the big danger for this is the eurozone.

“Some people know I am a convinced European, in the sense that I thought the Common Market was a perfectly acceptable thing.

“I grew very worried about it when we got the eurozone.

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“Instantly, I thought ‘you can’t run a currency unless you are a country’.

“That has been proven. I have a house in Greece and what I saw there in the last 10 years made me realise it would have been complete madness for us to join the eurozone.”

Lord Owen noted: “There is no doubt that Tony Blair would have taken us in.”

During his years as Prime Minister, the former Labour leader made one of the strongest cases for the country to adopt the single currency and often claimed it would have been a “betrayal” of Britain’s national interest to stay out of the monetary union.

He was arguably stopped by his then-Chancellor of the Exchequer Gordon Brown, but according to Lord Owen, nobody could have done that.

The Labour peer explained: “Ed Balls would have stopped him if he had the power.

“But not Gordon Brown. He would have been bought off by Blair.

“We stopped going into the eurozone because of Iraq – that’s the truth that matters.

“It would have been easily been done if Number 10 got what they called the Baghdad bounce.

“There was no Baghdad bounce, therefore there was no eurozone referendum.

“I think we have escaped with our lives.”

In the early Noughties a false recovery signal was referred to as the Baghdad bounce after the rise in popularity that both George W Bush and Tony Blair enjoyed following the fall of Baghdad in the Iraq War.

However, that popularity waned somewhat later when it became clear that pulling allied troops out of Iraq was likely to take longer than the public had first anticipated.

In 2003, Mr Blair sustained significant political damage from the debate over Iraq.

His personal rating dropped through the floor to minus 20 points – the lowest level since the petrol crisis.

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