Danish Voters Say No to Euro

Voters in Denmark on Thursday rejected joining the European common currency, setting up the already embattled euro for further drubbing on international markets and highlighting the deep rift separating Danes committed to an integrated Europe and those fearful of losing their national identity to a continental superstate.

With a phenomenal 87% turnout, reflecting Danes’ strong emotions on the question of surrendering their sturdy krone, opponents overwhelmed supporters by a wider-than-expected 53% to 47%.

The referendum in Denmark--the only country to put the decision in the hands of the people--was seen as a test of voter confidence in the struggling currency that has lost more than a quarter of its value in a mere 21-month existence.

The Danish rejection not only portends further weakening of the euro but threatens the emergence of a “two-tier Europe.” The more powerful countries within the 15-member European Union, namely Germany and France, are now forced to move ahead without the naysayers in their quest for harmonized economic and social policy.

Danish Prime Minister Poul Nyrup Rasmussen looked near tears as he conceded defeat in his government’s impassioned campaign to win support for the euro.

“When you fight so hard and don’t reach your goal, this must be seen as a defeat--a defeat for me and a defeat for the line we had chosen in our party,” he told supporters from his Social Democratic Party. “But democracy has spoken. Our people, the Danes, have spoken.”

Economists predicted the common currency would lose an additional 2% of its value as a result of the “no” vote.

Put on the defensive by gloomy poll forecasts on the eve of the vote, European monetary officials acknowledged that Danish rejection would put enough pressure on the euro that the Group of 7 industrialized nations would have to react.

The European Central Bank last week tried to bolster the euro as it hit new lows by getting the United States and other G-7 countries to invest in the sliding currency, lifting it from a low of 85 cents against the dollar to more than 88 cents by the start of voting. As Denmark’s early returns were posted, the euro slipped below 88 cents in New York trading.

“Further intervention can be expected,” Klaus-Dieter Kuehbacher, a member of the German Bundesbank governing council, told journalists in Frankfurt.

Rasmussen also said Danish monetary officials would intervene to support the krone if, as pro-euro campaigners warned, the defeat prompts currency speculation.

But some analysts, such as Danske Bank chief economist Joergen Birger Christensen, said international markets had expected a “no” vote and had already adjusted themselves to that outcome.

Rather than confronting voters with a purely economic issue, the referendum served to measure Danes’ willingness to surrender some authority to Brussels. Rejection had been urged by an alliance of strange bedfellows--the far-right Danish People’s Party, the far-left Socialist People’s Party and the single-issue “euroskeptic” June Movement. They cast the euro as a threat to national sovereignty and another foot in Denmark’s door for cheap labor from southern and eastern Europe.

“We are still friends of Europe--but the Danish people have shown they want democracy, not a United States of Europe,” said a jubilant Pia Kjaersgaard, head of the nationalist People’s Party.

Denmark’s mainstream parties and most businesses had urged the Scandinavian country’s 4 million voters to embrace the euro. The “yes” team, which outspent opponents by at least 3-1, argued that as the Danish krone is already pegged to the German mark--and thus the euro--official adoption would mean only the advantageous change of giving Copenhagen a voice in EU economic policy decisions.

Voter rejection of that advice could spell trouble for Rasmussen’s fragile coalition, because it made the euro a key objective.

The referendum was the sixth vote on EU involvement since Denmark joined the alliance in 1973, and another vote on joining euroland is unlikely for years. Many Danes expressed anger at what they saw as government refusal to take their earlier “no’s” for an answer. Voters rejected the Maastricht Treaty on European unity in its entirety in June 1992 but reconsidered a year later when the referendum was tailored to allow Danes to “opt out” of several EU objectives, including the common currency.

EU officials planned to meet this morning to discuss the Danish outcome--a strategy huddle called even before the results were in. The surprisingly decisive protest vote is likely to discomfit some of the 11 EU states already using the euro, because support has been faltering apace with the currency’s decline. The latest polls in Germany, the euro’s most powerful economy, showed that two out of three voters would prefer to keep their marks.

Denmark’s decision also has dire consequences for the pro-euro movements in the only other EU countries to voluntarily stay out of the common currency, Sweden and Britain. Euro opponents currently hold sway in both countries, and the Danish vote is expected to harden resistance and force supporters to put off votes until at least 2003.

Many Danes have been skeptical of swapping their krone for the euro out of fear the EU hierarchy in Brussels will swell into a supranational bureaucracy serving the interests of bigger countries over small nations such as their own.

Recent suggestions by EU politicians that tax and pension policies would one day be harmonized also scared off many Danes who are keen on retaining a national welfare system that is one of the most generous in the world.