Editor's Note: This installment is the first of a three-part series that will delve into the issues facing the eurozone and the European Union and discuss the positions of the United Kingdom, Sweden and Denmark. Click here to read part 2 and part 3.
A deep economic and political division exists within the European Union between the eurozone states and the 10 EU members outside of the monetary bloc: the United Kingdom, Sweden, Denmark, Latvia, Lithuania, Poland, the Czech Republic, Hungary, Romania and Bulgaria. Among these 10 countries, there are vastly different views of the banking union and the overall trajectory of the European Union and eurozone. As the European Union continues trying to resolve the financial crisis, efforts at deeper integration among the eurozone states will be high on the EU agenda in the coming months. Projects such as the proposed European banking union and more comprehensive fiscal integration efforts aiming to overcome the crisis within the currency union — but affecting countries outside the currency union — will be especially high priorities. The eurozone states' national strategic interests have spawned differing views of these projects, and the debate likely will push the banking union's debut well past its proposed start date of January 2013.
However, an even deeper division exists between the eurozone states and the EU members not in the monetary bloc. Some of these countries are apprehensive about signing on to projects like the banking union — which, according to current proposals, will have greater control over banking regulations but will not give the non-eurozone countries what they consider a sufficient voice in decision-making efforts. The EU countries outside the eurozone are attempting to adapt to this new situation. While some of these countries need to keep a distance from eurozone developments for strategic reasons, they face the possibility of increasing irrelevance in European policy discussions if they choose to avoid further European integration.
It is important to understand the non-eurozone states' positions regarding the eurozone and its integration efforts in order to get a more comprehensive idea of where the European Union and eurozone will be in the months and years ahead.
United Kingdom
Relations with Europe
The United Kingdom's relationship with continental Europe is complex. London has a dual strategy that involves maintaining a close link with the United States without straying too far from European affairs. London has sought a balance between the protection of its sovereignty and the growth of the European project. In 1992, the United Kingdom agreed to sign the Maastricht Treaty that created the European Union but gained a concession exempting it from joining the common currency. In the past two decades, London has sought exemptions and concessions in each new European treaty.
The United Kingdom's political elite are critical of the European Union. The general opinion in the country is that it is a net contributor to the European Union (and Brussels' bureaucracy in particular). The British Parliament is often suspicious of the supremacy of European law over British law. The United Kingdom often criticizes the Common Agricultural Policy, which basically subsidizes agricultural sectors in continental Europe, and the Common Fisheries Policy, which essentially forces the United Kingdom to share its fishing waters. However, London is a strong defender of the single market, and 48 percent of the United Kingdom's total goods and service exports go to the European Union.
London has failed in its efforts to block recent measures designed to deepen economic integration within Europe, and Germany and France have decided to move forward with those measures despite the lack of British support. In November 2011, the European Union decided to proceed with the fiscal compact treaty although the United Kingdom refused to sign it. At present, London's refusal to accept a banking union will not prevent the union's implementation by eurozone members.
Eurozone Accession and View of Integration
Because of its exemption from the European Union, the United Kingdom is one of the few EU members, along with Denmark, not required to eventually join the common currency. London has opposed the banking union since it was first proposed. British Prime Minister David Cameron said he would not ask British taxpayers to underwrite the debts of ailing banks in Greece and Spain, saying, "It is not our currency." London is also concerned that the banking union would undermine the European Banking Authority. That said, the United Kingdom has said it will not oppose measures designed to solve the eurozone crisis, but it is unclear how London will manage this apparent contradiction.
The Domestic Political Situation
In 2011, the British Parliament approved the European Union Act, which requires new transfers of sovereign powers to Brussels to be approved by referendum. Now, a faction of the Conservative Party is pressuring Cameron's government to call a referendum on the United Kingdom's EU membership. The conservative government's current tactic is in line with London's long-term strategy regarding the European Union. The United Kingdom is wary of any sovereignty concession to Brussels, but is not interested in quitting the European Union. We can expect a constant British opposition to each new European agreement or treaty, but a formal break is unlikely.
Sweden
Relations with Europe
Sweden, the largest Nordic economy, is strongly integrated into Europe. The country has a strategic interest in containing the large European powers to its south and Russia to its east. The European Union and its stability are important for both of those purposes, which is why Sweden sees European integration as beneficial. So far, Sweden has shown resilience in the European crisis. However, growth forecasts for Sweden have been lowered, and Stockholm has a general interest in the eurozone overcoming the crisis to avoid further domestic slowdown.
Eurozone Accession and View of Integration
Sweden is supposed to join the eurozone at some point, and the country's major political parties support eurozone membership. However, in a 2003 referendum, Stockholm opposed eurozone membership and since the outbreak of the European crisis, opposition toward the currency union has been growing. Although Sweden is not a eurozone country, it did ratify the fiscal compact. However, Stockholm opposes the banking union proposal because it fears that the European Central Bank as a regulator would gain too much power in the European financial sector. Sweden, like the United Kingdom, has a large banking sector and does not want it to be too regulated by a body in which Stockholm has no say.
The Domestic Political Situation
Most Swedish political parties support eurozone membership but have said they will not push the issue in the near future. There are fringe euroskeptic parties in Sweden, and a poll from May showed that 77 percent of Swedes opposed eurozone membership. Although the political elite generally favor deeper European integration, the government does not plan to hold a referendum on eurozone membership until there is strong sign of support for joining the monetary bloc.
Denmark
Relations with Europe
Denmark, a longtime NATO and EU member, is strongly integrated with Europe and the West. As a trade-dependent country, Denmark is concerned about the economic downturn in Europe. While Denmark has remained outside the currency union, just like other small but stable European countries it wants to ensure that the European Union and the eurozone are not dominated by the largest European powers such as Germany, France and the United Kingdom. It therefore approves of European integration as a means of containing the large powers. Denmark has especially strong ties to the other Nordic countries, which — except for Finland — are not eurozone members.
Eurozone Accession and View of Integration
Denmark is one of the two EU countries technically not required to join the eurozone. This was agreed to after Denmark rejected the Maastricht Treaty in a 1992 referendum. While most political parties support Danish eurozone membership, the population rejected joining the currency union in 2000. Opposition to eurozone membership has been especially high since the outbreak of the financial crisis. Because of this popular opposition, there is no further referendum planned. However, since Denmark has a fixed exchange rate to the euro, under the European Exchange Rate Mechanism the country does not really have an independent monetary policy and the Danish Central Bank often mirrors the European Central Bank's monetary policy decisions.
Although Denmark is not part of the eurozone, it still pursues deeper European integration. Denmark ratified the European fiscal compact and is not entirely opposed to the recently proposed banking union. Danish Economy Minister Margrethe Vestager and Danish Central Bank head Nils Bernstein said that non-eurozone countries would have to be treated as equals if they join the banking union to make sure these countries' monetary policies are not dictated by the European Central Bank.
The Danish foreign minister is one of 11 EU foreign ministers in the Future of Europe Group, organized by German Foreign Minister Guido Westerwelle. The group does not make formal decisions, and the ministers do not speak for their respective governments, but the group is an opportunity to discuss deeper European integration. The Polish and Danish foreign ministers are the only two non-eurozone members in this group, which shows that both countries want to make sure the eurozone is not divided from the larger European Union.
The Domestic Political Situation
The only euroskeptic political parties in Denmark are small; the political elite generally favor greater European integration. Since 2011, Denmark has had a minority center-left government. The Social Democratic Party leads the current government coalition. The Socialist People's Party, which is part of the current government coalition, initially was a euroskeptic party and opposed eurozone membership in the 2000 referendum. While the party is no longer strictly euroskeptic, it called for a referendum on the fiscal compact (which never took place). Certain parties within the current government are unlikely to agree to stronger fiscal control from Brussels should this be debated.
