BRUSSELS A no' vote in tiny Denmark's euro referendum could heighten a sense of crisis in the European Union, already reeling from a battered currency, widespread tax revolts and unease over a heavy-handed policy toward Austria.
Popular support for the EU could sink to new lows, triggering a fresh sell-off of the euro and accelerating moves to a two-speed Europe, according to political analysts.
Denmark, the fourth smallest member of the 15-nation EU, votes on September 28 on whether to join monetary union, dumping its cherished krone and adopting the euro.
For the nation's pro-euro camp the main political parties, business and media the euro's recent slump could not have come at a worse time.
Early on Tuesday the euro sank to new lifetime lows of 84.80 cents, more than 27 percent below its January 1999 launch value, and 90.70 yen.
U.S. Federal Reserve Bank of Richmond President Alfred Broaddus said the unthinkable at the weekend, querying the euro's long-term viability another kick in the teeth for the punch drunk currency.
According to Danish opinion polls, the likely no' vote has risen as sharply in recent days as the euro has dropped on financial markets. One Gallup poll on Tuesday gave the no' vote a 12-point lead.
"If the Danes vote no, it's another big negative for the euro," said Peter Lorraine, senior foreign exchange manager at Brown Brothers Harriman.
Danish No' Could Hit More Than Euro As the markets factor in a Danish rejection, signaling further euro falls, others look to a broader ripple effect.
Political analysts reckon a no' vote could deepen splits between the bloc's core integrationists and those who, like Denmark, opt out of Monetary Union.
A no' would make it virtually impossible for similar ballots to go ahead in Sweden or Britain for several years.
"It would obviously be an encouragement to those who are arguing for enhanced cooperation, going right the way through to the core Europe brigade," said Michael Emerson at the Center for European Policy Studies, a Brussels-based think-tank.
"It's probably too early to say whether (a negative vote) would speed up a two-tier EU, but it would certainly be a contribution to that debate." The Danes, who shook Europe to its core when they voted against the Maastricht Treaty the initial blueprint for Economic and Monetary Union in 1992, could, by voting against the euro, slow the bloc's eastward enlargement and hold up moves to coordinate defence and security policy.
It is thought that, if the Danes reject the euro, some of the Central and Eastern European candidate states could have second thoughts about rushing to join the EU.
"The issues are colossal whether you go far down the core Europe track ... and the connection between that and enlargement is of course enormously important," said Emerson.
Krone Would Be in Firing Line John Palmer, director of the European Policy Center, another Brussels think-tank, said, however, the main impact of a 'no' vote would be felt at home in Denmark where the krone, which, unlike the pound, is tied to the euro, could come under fire.
But he did not discount broader repercussions.
"I don't think it would have a hugely fundamental impact on longer term developments, but it would certainly send those negative messages in the short term," he said.
"It might well have the effect of lending more substance to the argument about enhanced cooperation, or making it easier for some countries to integrate more closely." Danish rejection of the euro would be seized on by Europe's growing ranks of skeptics who, already disenchanted with the single currency, the Brussels institutions and enlargement, fear a steady march to a European super-state.
Danish Economy Minister Marianne Jelved, a strong euro proponent, warned waverers on Monday that a no' vote would be a vote for a divided Europe.
(Reuter)