A Nobel vote for the euro

Economics: Swedish Academy gives prize for theory that Sweden does not follow.

October 16, 1999

OFTEN, the Royal Swedish Academy of Sciences preaches to the world in awarding Nobel Prizes for Economics. It suggests what theories, policies or nostrums are good for nations that may regard them as bitter medicine. But in awarding the 1999 Nobel Prize to Robert Mundell, the Academy is sending a message to the Swedish people.

Sweden belongs to the 15-nation European Union (EU) but not to its 11-nation European Monetary Union (EMU). Sweden qualifies to adopt the euro as currency in place of the krona, but declines. Many of its economists, bankers and politicians think it should, but they fear a referendum might fail.

Sweden's economy has done all right since the euro went forward in other European countries on Jan. 1. As things stand, a Swedish or Italian worker can buy each other's products without trade barrier, or work in each other's place. The payment in Sweden will be in Swedish kronor. In Italy, it will be in lire pegged to the euro until 2002, when the currency changes over to euros.

The Academy awarded this year's Nobel largely for papers that Professor Blundell wrote in 1961-1963 as a young staff economist of the International Monetary Fund. These questioned the value of national currencies and established yardsticks for judging whether a nation is better off sharing a common currency.

His "optimal currency area" would link those Italian and Swedish workers today. The Swedish Royal Academy of Sciences appears to be trying to convince skeptical Swedes.

Professor Mundell's work helped to make the European Monetary Union possible. So far, he is pleased with it. So, apparently in envy, is the Royal Swedish Academy of Sciences.

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