Nordics ponder globalisation, "shelter" of euro

By Wojciech Moskwa

KEFLAVIK, Iceland, Feb 26 (Reuters) - Prime Ministers from five Nordic countries are due to meet in Iceland on Thursday to discuss globalisation and a new report suggesting they should re-think their go-it-alone currency strategies.

With the exception of euro-member Finland, the other Nordic states maintain their own currencies. Norway and Iceland are not even in the European Union, a fact which accelerated the crisis in Reykjavik when its three top banks collapsed last year.

A report prepared for the annual Nordic Council meeting spelled out challenges facing Sweden, Denmark, Iceland, Norway and Finland from the crisis and recommended more debate about the merits of staying outside the "shelter" of the euro zone.

"The Nordic countries need to have a serious debate about the costs and benefits of independent currency regimes and, primarily for Iceland, staying outside the European Union," said the report, written by Christian Ketels from the Harvard Business School and Handelsshogskolan in Stockholm.

"If crisis in the new global environment (becomes) too powerful, the shelter of a larger economic region might have additional benefits," the final draft of the report said.

Danish Prime Minister Anders Fogh Rasmussen has repeatedly vowed to secure broad parliamentary support for another referendum on joining the euro before his government's mandate expires in 2011. Denmark rejected the euro in a ballot in 2000.

Sweden, which nixed joining the single currency in a vote in 2003, is also reconsidering the euro option.

Support for EU membership surged in Iceland in the wake of its financial collapse, but the pace and direction of potential membership talks with Brussels will largely depend on the result of April's snap parliamentary election. The two parties in government are split over the merits of EU entry.

The report also said the Nordic states, which traditionally offer an extensive welfare system paid for by high taxes, should now boost incentives for entrepreneurship and competition on domestic markets to stave off the worst of the global crisis.

It said the Nordic region was well positioned to lead the field of renewable energy development, from Norwegian and Swedish hydropower, to Danish wind farms and Iceland geothermal resources, but they had to work together to remain a force.

"More alignment of regulations would enable... a more integrated Nordic market for energy and environmental projects, with benefits for competition and innovation", it said, adding that rivalry would increase as more U.S. and European countries shift towards renewables to counter global warming. (Editing by Toby Chopra)