UK decision may sway Swedish voters to reject single Euro currency

BRITAIN'S decision to hold off on the euro could help persuade at least one other European Union member - Sweden - to stay out.

The country's nine million population is to vote on euro entry in a referendum in September, and polls show public opinion has slowly shifted in favour of keeping the krona.

Euro proponents brushed off Britain's decision to stick with the pound yesterday.

"Sweden is a small and open economy," said Jonas Frycklund, a spokesman for the Federation of Swedish Industries, a pro-euro trade group. "It's not like Britain, which is big. Everybody here is aware of that."

Voters in Denmark, the other euro hold-out, have twice turned down the single currency. A failure in Sweden could spell the death-knell for another attempt.

In a survey in the country last month, 54 per cent of those polled said they would vote no, against 42 per cent in favour.

Euro critics cite the fear of losing control of the country's monetary policies, as well as losing Sweden's cherished egalitarian identity.

A stepped-up campaign has enrolled Anna Lindh, the foreign minister, in a bid to influence the women's vote. She argues that a no vote could lead to a decline in Swedish influence on European issues.

But others remain critical of what the common currency could do to Sweden's economy, which is hinged, like Britain, in international trade inside and out of the EU.

Opponents on the left say the euro's inflexibility has hurt the ability of countries such as Germany and Ireland to vary interest rates to heat up or slow down their economies.

Meanwhile, in a vote at the weekend, Poland confirmed that it will soon become the largest of ten new members to join the EU. All ten have agreed eventually to adopt the single currency as well.

Final referendum results showed more than three- quarters of those who voted backed Poland's entry. The vote may boost support in the Czech Republic for joining the EU. The country holds a referendum this weekend.

Back home, Tony Blair worked the telephones yesterday in a series of calls to world leaders to explain Britain's verdict on euro entry.

However, the decision to hold off, in the wake of splits in Europe over the Iraq war, will inevitably be seen as another signal that London is more in step with Washington than Brussels.

Mr Blair was to talk to Jacques Chirac, the French president, and Gerhard SchrÃ¶der, the German chancellor, among others, to explain Britain's euro plans, officials said.

The two countries' reaction was muted yesterday. Berlin couched any disappointment over the decision in diplomatic terms - but publicly clung to the hope that Britain will join the single currency.

"We welcome the British government creating clarity about the subsequent steps," said the German finance ministry.

"We fully understand the British decision not to call for a referendum now."

But the ministry suggested British reforms could lead to positive results on economic tests next year. "Over the long-term, Britain's joining the euro would be an advantage both economically and politically for the currency and Britain," it added.

The New York Times caught the flavour of the reaction to Britain's decision yesterday.

In a report on its website, it said "the announcement to parliament seemed to illuminate once more Britain,s deep-rooted aversion to committing itself unequivocally to a continent that it sees as distinct - geographically, economically and culturally".