Social partners consider advantages and disadvantages of the euro

Denmark is not participating in the third stage of EU Economic and Monetary Union (EMU), as a consequence of its initial "no" vote on the Maastricht Treaty in a 1992 referendum. It was only after the Treaty had been amended, including the exclusion of Denmark from the third stage of EMU, that a majority "yes" vote was obtained in 1993. Since then, and in particular since the introduction of the euro single currency in January 1999, it has been argued with increasing intensity by employers' organisations, but also several of the large trade unions, that Denmark should give up its reservations, especially regarding the third stage of EMU. However, it has not yet been settled when, or if, there will be a new referendum on Denmark joining the euro.

Denmark is not participating in the third stage of EU Economic and Monetary Union (EMU), which has seen the introduction of the euro single currency. This is one of the consequences of the country's initial "no" vote on the Maastricht Treaty in a 1992 referendum, which led to Denmark having a number of reservations inserted in the Treaty, including non-participation in the third stage of EMU. A subsequent referendum resulted in a majority in favour of the modified version of the Treaty among the otherwise "EU-sceptic" Danish population.

In recent years, opinion polls have show that the Danes are deeply split in their views on the euro. A survey conducted in 1996 indicated that just under 50% of the population did not think that the single currency would create any increased economic growth, while just over 50% believed in this growth potential as a result of monetary union. The general attitude among Danes was that the country's reservation regarding the euro should be maintained. Therefore, it caused a considerable stir when opinion polls at the beginning of 1999 indicated that there was an overwhelming majority in favour of the euro. Indeed, the figures showed the highest-ever support for a referendum on Denmark's position in the European Union. These figures suggested that a Danish referendum on its euro "opt-out" might be imminent.

However, in the elections to the European Parliament held at the beginning of June 1999, it was confirmed that EU scepticism is still strong among Danes. In broad terms, the opponents of the EU won another seat so that they now hold six out of the 16 Danish seats in the Parliament. This has caused several observers to state that a referendum on Denmark's possible full participation in monetary union is probably not as imminent as many people otherwise tended to think.

Economic costs of being outside the euro

The discussion of whether Denmark should be part of the "eurozone" in future is often based on economic considerations. In spring 1998, the Ministry of Economic Affairs (Økonomi Ministeriet) published a report on the consequences of being outside the cooperation on the euro. Around 50% of Denmark's foreign trade is with the eurozone, and if Sweden and the UK join the euro, the figure will rise to around 75%. Barriers to free trade such as exchange rate fluctuations and transaction costs have been eliminated between the euro countries. The new price transparency and the resulting competition would also be an advantage to Danish enterprises, but overall the report concludes that Danish enterprises will not achieve advantages as significant as their competitors in the eurozone Denmark must also, it is stated, expect a slightly higher real interest rate if it remains outside the euro.

The employers' organisations, the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA) and the Confederation of Danish Industry (Dansk Industri, DI), have stressed the negative economic consequences for the Danish economy of not participating in the euro. Following on from the above evaluations, DI has argued that the higher interest rate will mean a lower level of investments, which, in the long term, will result in lower Danish productivity and consequently also lower income for employees. Therefore, these employers' organisations want a quick "showdown" on the Danish reservation on the euro.

Trade union views

On the part of wage earners, the Danish Federation of Trade Unions (Landsorganisationen i Danmark, LO) has, so far, maintained that it respects the Danish reservations, including the reservation regarding monetary union. However, at the same time, LO has made it clear that it will closely monitor developments in the eurozone and evaluate what consequences non-membership may have for Denmark. For this purpose, LO has, among other measures, set up an EMU committee on which there are representatives from all the large trade unions. The committee aims first and foremost to examine the economic consequences of Denmark's non-participation in the euro. While focusing on these issues, the committee has also chosen to implement a study of the conditions on the labour market in the USA, examining what consequences the existence of a single currency has had in this large geographical and economic area. The committee will present its material for a debate at the next LO congress, which will be held in October 1999. This debate may result in LO changing its stand on the Danish reservation regarding the euro.

In general, however, it is stressed in the trade union movement that monetary union must not become an objective in itself. Instead, the overall objective must be to ensure sustainable economic expansion and an increase in employment. On this basis, LO, among others, is calling for greater overall coordination of budgetary policy in the EU. In particular, unfair tax competition is feared in the area of fiscal policy - including primarily corporation tax, capital income tax and green duties.

The current situation is that there are different attitudes to the euro in the trade union movement. The National Union of Metalworkers (Dansk Metal) has stated - in line with its employer counterpart, DI - that it wants a showdown on the euro opt-out. If there is a referendum on Danish membership of the euro, Dansk Metal and DI will jointly implement an information campaign on the consequences of membership. The trade unions which are in favour of the euro include the National Union of Commercial and Clerical Employees (HK-Industri) while Euro-sceptics in the trade union movement include the General Workers' Union (Specialarbejderforbundet i Danmark, SiD), where it is undoubtedly an important factor that there have traditionally been many EU opponents among the organisation's members.

Political costs of being outside the euro

In LO, it has been acknowledged that the euro will be of importance to the cooperation between trade unions in Europe, and that Danish unions risk losing political influence in relation to the countries in the eurozone. An omen of this came in metalworking, where Dansk Metal has seen its counterparts in the rest of the EU meeting and cooperating at bilateral and regional levels (DE9904298F). This may be seen as an indication that the core countries in the eurozone are forming closer ties, whereas discussions with representatives from Danish organisations are not of such great interest.

The pegging of the exchange rates within the eurozone has given rise to discussions on the possibilities of coordinating collective bargaining demands at EU level (DE9812283F). The Danish social partners are aware of these discussions at European level, but are at the same time generally sceptical of the idea of more extended coordination of pay demands. However, representatives from various trade unions admit that this development has been rapid in recent years. While a few years ago, it was unthinkable that the possibility of joint European bargaining demands would be discussed within trade unions, this is now occurring.

HK-Industri has gone further than simply discussing this issue. At the end of 1997, it presented a comprehensive proposal for a European system for industrial relations (DK9712143F).

Commentary

One of the paradoxes of Denmark's reservation regarding the third stage of EMU is that virtually everyone agrees that Denmark will be forced to meet the convergence requirements which have been laid down for the countries participating in the euro, and to follow the decisions which the euro countries may make, in order not to create financial and monetary policy instability in Denmark. In other words, it could be argued that a "small" currency such as the Danish krone has become a "shadow member" of the eurozone at the same time as the Danes have sidelined themselves from influence on the development of that zone.

The Danes' general lack of enthusiasm for the EU puts the social partner organisations in a dilemma. They have the possibility of participating in setting the agenda at European level, but, to a great extent, they feel constrained to proceed cautiously because of the wide scepticism among Danish workers. There are admittedly polls which show that a majority of Danes, as well as a majority among, for example, members of LO, generally want Denmark to be a part of the eurozone. However, there is much to indicate that this is a majority which may evaporate quickly the further we move on from the "europhoria" which characterised the introduction of the single currency at the beginning of 1999. The recent elections to the European Parliament were a signal that general EU scepticism remains strong among the Danes. (Søren Kaj Andersen, FAOS)