Europe : Federalism in a Bind

The outcome of last month's referendum in Denmark on embracing the 'euro' – with the majority of the voters saying 'no' – carries a message that should be of interest to federalists everywhere. The rejection by the Danes of the proposal to share a common currency with the countries of the European Union not only undermines the already weakened monetary unit introduced last year as part of a strategy to bolster EU's economic integration, but is also a setback to the vision of a politically united Europe so ardently championed by Germany and France. The idea of a common currency for the countries of the EU was advanced some five years back by the then German chancellor Helmut Kohl. It was meant to serve as an instrument to forge a United States of Europe that could be strong enough to counter the hegemony of the US. With its adoption by Greece earlier this year, only three of the 15 members of the EU – Britain, Sweden and Denmark – had remained outside the fold of the euro. Its rejection by the Danes puts a question-mark over early acceptance by the other two countries of the shared currency, giving up their own national currencies. Selling for $1.17 at its introduction, one euro now buys no more than 87 cents, reflecting a weakness that seems to call for "the support of something as big as a government for Europe", as a writer in the New York Times recently put it. A politically unified Europe is needed, according to its proponents, to run not only a common currency but also common fiscal and other policies to sustain it. With the Danes saying no to the euro the shadow over European federalism is unlikely to lift soon.

A combination of factors seems to have swayed Danish voters away from a common currency so passionately advocated by their Social Democrat prime minister. This was the first time that the idea of a common currency was put to the test of popular will in any of the countries where the new medium of exchange has been put into circulation. The outcome of the Danish referendum has revealed the 'democratic deficit' of the leaders who are pushing for a closely integrated Europe, sounding a warning that they are 'racing ahead of their electorates'. But there are deeper concerns as well.