Summing Up Paul De Grauwe

 We have discussed many issues  Let me organize the issues around the forthcoming referendum in Sweden  Suppose we were Swedes and we would vote in the referendum.  How would we vote given all we have learned here in sunny Crete?  Before doing this, let me first look at the macroeconomic performance of Sweden and the Eurozone

 The opponents to EMU in Sweden have an easy job today.  Being very sophisticated, we would look at other, more fundamental indicators, than the macroeconomic performance in  We get to the OCA-criteria (Mundell I)  Looking at the evidence (openness, asymmetric shocks, flexibility) we do not find that Sweden stands out as being very different from Finland, Austria, i.e. countries that are part of EMU

 But maybe these countries have not done their homework properly.  And there is still the possibility that some large shocks occur making the adjustment very difficult.  Austria and Finland may then regret it to have entered EMU

 All this is too pessimistic. There is Mundell II to cheer us up  Once in the union, Sweden will be spared the chronic speculative foreign exchange crises that it has experienced in the past and that have rocked the country  In addition, thanks to the endogeneity of the OCA-criteria the benefits of EMU will increase  In particular, thanks to the full integration of the Swedish capital market with the Eurozone, Swedish consumers will be able to smooth their consumption even after large shocks in output.

 The picture gets more positive.  There are more clouds, though.  Sweden will be subjected to the stability pact which is a set of rules constraining its independence.  There will be the European Commission telling the Swedes what they should do.  So, there is more to monetary union than monetary union

 EMU could become a Troian horse that will force political union onto the Swedes,  Will they not be ruled by faceless bureaucrats in Brussels?  Will the Swedes not loose their independence and their soul?  The picture gets even more confused.

 There is more to confuse us.  A Swedish yes vote may turn around public opinion in the UK and Denmark, and may facilitate the early entry of central Europe.  Will this not lead to a union that is just too big to manage?  The enlarged ECB will become even less transparent than it is today, leading to confusion in the financial markets  And giving the FT more reason to criticize the ECB

 But then again, this large union will stimulate trade and finance;  it will enhance mobility of capital and labour  and boost economic growth (making André and Marco happy).  solving our social security system including our pension systems.

 And when all this has happened, the euro may overtake the dollar as the world currency  allowing Eurozone governments to run large budget deficits without having to worry about excessive debts  because these deficits will be financed by eager Asian governments willing to buy large amounts of eurobonds (including the Italian benchmark bonds)  making it possible to burry the stability pact (making Jacques, Paul and Richard happy)

 The future looks bright  Will the Swedes lend their ears to this optimistic message?