Swedish government moves to secure trade union EMU support

The Swedish government, facing growing opposition to adopting the euro ahead of a September referendum, has agreed to set aside special funds to protect jobs in exchange for trade union support for the euro, the Dagens Nyheter daily reported.

Although a member of the European Union, Sweden like Britain and Denmark, did not join the Economic and Monetary Union together with the other EU members in 1999 but wants to hold a referendum on the issue on September 14.

But support for EMU has been steadily deteriorating in Sweden over the last four months with the "no" camp now clearly in the lead as a result of the euro zone's budget discipline problems.

Sweden, which has a budget surplus and is a net contributor to the EU's coffers, also has lower unemployment and higher productivity than the euro zone. Economists say the lack of a common policy of the EU towards a war in Iraq is further eroding support for EU projects in general.

Sweden's ruling Social Democrats have been backing a switch to the euro since 2000, as do major opposition parties.

But the country's powerful trade union organisation LO, which has 2.1 million members in a country of nine million people, said it would only recommend to vote "yes" to the euro if the government created special funds which would be used to cushion the effects of external economic shocks.

The trade unions also want the government to set up a governing body in which trade unions would be represented, which would advise how to spend the money.

The heavyweight Dagens Nyheter daily quoted unnamed sources as saying that a committee led by Finance Minister Bosse Ringholm has agreed to create such funds by increasing the government's budget surplus target to 2.5 per cent of GDP from 2007 from the current 2.0 per cent.

If Swedes vote "yes" to the euro, the country could join EMU in 2006.

The raising of the surplus target would produce about 10 billion Swedish crowns a year, the paper said. The money would be put into a special reserve which could be spent during a dip in the business cycle.

It could also be used to offset the effects of the European Central Bank's monetary policy in case it does not match the phase of the economic cycle Sweden is in.

The LO is to decide if the finance minister's proposals are enough to secure its support for EMU in April. The TT news agency reported that Mr Ringholm would not comment on the Dagnes Nyheter report.