Heading into the Zone?: Danish Prime Minister Pushes for Euro Referendum in 2010

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The Danish government may be moving towards a referendum in 2010 on adopting the euro. Danish Prime Minister Anders Fogh Rasmussen says the way forward towards a referendum is clear, and hearings to explore the way forward began in parliament on Thursday.

Although Rasmussen has said he is not prepared to put a date on the referendum, the script appears to be written on how to fulfil demands made by the leftist Socialist People's Party (SPP) in exchange for its support for euro zone membership. The prime minister's roadmap begins Thursday as experts and politicians gather in the country's parliament for a major hearing on the benefits and drawbacks of the euro.

"We have developed a process which begins with this hearing. If another hearing becomes necessary in order to clarify some issues that will also be possible sometime in the spring," said Fogh Rasmussen.

The Danish prime minister has stressed that all pro-European Union parties -- the vast majority of those represented in parliament -- must support membership in the euro zone before any referendum can be put to voters.

In order to achieve unanimity, several demands put by the Socialist People's Party must be met, including greater transparency and control of the capital market, safeguards against speculation, increased attention to unemployment and social needs as well as "green growth."

The credit crunch may just have come at the right time for Fogh Rasmussen, who has long been a strong advocate of the euro, which was rejected by Danish voters in a referendum in September 2000. As the financial crisis took hold, the European Central Bank reduced interest rates to kick-start lending. But pressure on the Danish krone made Denmark's central bank, Nationalbanken, raise rates. Since then, Nationalbanken has begun reducing rates as part of monetary policy to get credit markets moving again. But the euro-krone currency complex has highlighted for Danes just how much the euro zone actually determines for their pegged currency, without them being able to influence decision-making.

It is here that Fogh Rasmussen believes that the financial crisis has provided the framework for the SPP's demands to be met. Without support from the opposition SPP and all of the country's major parties, it is unlikely Rasmussen would be able to generate public support for a referendum to adopt the euro.

"Developments are clearly in the direction demanded by the Socialist People's Party," the Danish prime minister said. "One issue I have noted is that the SPP is looking for a better regulation of the international capital markets -- and that is precisely what is currently under way."

A public opinion poll published by Danske Bank in December showed 43.8 percent of Danes favoring adoption of the euro compared with 38 percent who were against it. The bank's poll has been showing a close race between the "yes" and "no" sides of the euro debate for some time, but the survey has shown a shift towards support for the euro in recent months as a result of the economic crisis. But economists at Danske Bank, Denmark's largest consumer bank, have warned in recent months that it is too early to conclude that a referendum on adopting the euro would come out in favor of the European currency.

Thursday's hearings in parliament will seek to clarify the benefits and drawbacks of euro membership for members of parliament across the broad spectrum of parties who may support EU membership, but not necessarily the euro, despite the indicators of the financial crisis. Most important of these is the SPP, whose electoral support has been boosted considerably in recent months as a result of its popular leader Villy Sövndal.

Sövndal himself remains skeptical.

"It's good that the prime minister is an optimist. But the demands that we have are far from fulfilled with the outline that he has put forward," Sövndal says.