Pressure on Persson after euro defeat

SWEDEN: The Swedish Prime Minister, Mr Göran Persson, will defend his government and its handling of the failed euro referendum…

SWEDEN: The Swedish Prime Minister, Mr Göran Persson, will defend his government and its handling of the failed euro referendum in his speech opening the new parliamentary term this afternoon.

It comes as Swedish investigators say they have recovered DNA material from the baseball cap worn by the man suspected of fatally stabbing Foreign Minister Ms Anna Lindh last week.

Mr Persson has said he will not resign over the referendum defeat, saying it was impossible to convince voters in Sweden, with higher growth and lower unemployment than the eurozone, that now was the time to adopt the single currency.

His finance minister, Mr Bosse Ringholm, said that the chances of a Yes vote were complicated by the high deficits in France and Germany that break the rules designed to protect the euro.

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"Germany's problems are a result of the unification and France's problems they have brought on themselves with large tax cuts, among other things, which have been idiotic because there was no money," said Mr Ringholm.

Mr Lars Heikensten, head of the Swedish central bank, the Riksbank, was more philosophical about the referendum outcome, saying that yesterday was just "another day in the office".

The same cannot be said for Mr Persson, who faces challenges at home and in Brussels after the emphatic rejection of his government's euro aspirations.

Mr Persson will face strategic difficulties in the new parliament if he is to find support for his minority government: until now he relied on the informal backing of the Party of the Left and the Green Party, the driving force behind the No campaign.

"The combination of the No vote to monetary union and continued co-operation with two EU-critical parties may be problematic for Sweden if it is to have influence inside the EU," said Mr Tommy Möller, a political scientist and commentator in the liberal Dagens Nyheter newspaper.

The fatal stabbing of Ms Lindh is likely to hang over the opening of parliament today and a special performance of Verdi's Requiem this evening at the Stockholm Opera House. Despite her pro-EU stance, Ms Lindh was widely respected and could have been effective at healing the EU divide within the Social Democrats. A cabinet reshuffle is likely to demote some if not all of the five cabinet ministers who were against adopting the euro.

Sweden's business leaders, almost all of whom backed the government's Yes campaign, warned of economic problems for Sweden in the medium term by keeping the krona.

"The outcome is not likely to have any major effects in the short term, but I see a clear risk that economic growth in Sweden may, over time, be affected negatively by the fact that Sweden loses its power to attract new investment," said Mr Carl-Henric Svanberg, the chief executive of Ericsson, the wireless equipment company.

Sweden's newspapers all warned of the dangers of the country becoming isolated in the EU.

The Aftenbladet newspaper urged Mr Persson to "learn from this defeat" and choose his political partners wisely in the future.

Five days after the murder of Ms Lindh, police still have no motive for the attack but have recovered DNA material from the cap worn by the man suspected of killing her. However the DNA material does not match any samples in the country's national database.