The Swedes have decided by a comfortable majority, not to further their membership of the European Union by also joining the single European currency. The rejection of the euro in Sunday’s referendum would probably have been even greater had it not been for a sympathy vote following the assassination of Anna Lindh, Sweden’s foreign minister and a prominent pro-euro campaigner.

The Swedish decision is likely to further undermine the already weakened position of the single currency’s supporters in the UK where the Blair government has promised a referendum but has yet to suggest a date. Sweden’s rejection of the euro is also likely to delay plans in Denmark to hold a second referendum, following the country’s rejection in 2000.

The effect of the Swedish vote on the euro itself and the 12 EU states that have adopted it will be depressing. It is a harsh fact that Euro-land continues to wallow in economic problems while both the Swedish and UK economies are performing well. Worse, while both Germany and France seem likely to break the rules of the Stability Pact upon which the currency was founded, the French government seems determined to use what it believes are loopholes, not only to allow it to increase its budget deficit above the three percent limit but also to cut taxes next year. This would make it almost inevitable that it will remain in breach of the pact’s rules. The time may not be far off when the international money markets begin to punish the euro for its inconsistencies and contradictions. A weakened euro might help exporters but it will seriously increase the cost of imports and thus boost inflationary pressure, forcing interest rates up and so hampering economic recovery.

At the heart of the whole euro issue is the faith that the 300 million Europeans who must use it have in the currency. That it facilitates trade within Euroland is not in doubt. However it also represents a key step along the path toward a unified European superstate. Though accepting the principle of political union, many EU citizens are unhappy about the timing.

Yet euro-enthusiasts are still driving the unification issue at a pace, which threatens to wreck their ambitions because they are not carrying the man in the street with them. In pure economic terms, the euro could have come about as a monetization of the old ecu (European monetary unit), a successful notional currency used by financial markets. Instead visionaries forced it through as a political step toward a truly united Europe.

Unfortunately it is not yet a vision shared by the majority of Europeans. Yet the politicians continue to try browbeating their people into accepting the vision now.