Is it time for Sweden to join the eurozone?
Jonathan Ward · 18 Dec 2008, 18:39
Published: 18 Dec 2008 18:39 GMT+01:00
After a massive financial system overhaul in the 1990s, Sweden seemed well placed to ride out the storm affecting the rest of the world. But amid rising unemployment and share-price slides, recent stories showthat the country's beloved krona is dropping, and fast. Consequently, many Swedes have begun speculating as to whether this will push the country any closer to embracing the comparative safety of the euro?
Some commentators suggest the krona is unlikely to reverse the slide against the euro for quite some time to come as the customary purchasing power of the Swedes continues to diminish. Imports, of which are there are many to Sweden, are increasingly expensive and, for travellers, winter holiday expenditures are set to rise.
Despite the currency's frailties, however, the majority of Swedes retain their rosy view of the resilience of the Swedish economy and the krona. As recently as this week, surveys showed little change in public opinion. Fewer favour the krona, yet - perhaps symptomatically - the number in favour of the euro remains low. Why the reluctance?
The debate on joining the European Monetary Union seems to divide the elites and the general public like none other in Sweden. In October, Prime Minister Reinfeldt told journalists at the European Union Summit: “When it's good weather it's not such a big deal to have a currency of your own, but when it's a little bit unsafe out there it's best to be inside a currency like the euro”. It would seem safe to assume the government is hinting not so subtly at a desire to join with the rest of the European crowd.
Political scientists Rutger Lindahl and Daniel Naurin have studied this issue and noted a 'cleavage' in opinion between the general public and the political elites. The problem is not so much about the euro or EMU, but instead centres on how Swedes view their relationship with the continent: a progressive member of Europe, but one that keeps a cautious distance. Naurin, of Gothenburg University, feels that the government would like to make a push if public opinion changed, but adds that is was unlikely to happen.
Interestingly, despite there being strong political arguments for and against the EMU, SEB bank's chief economist Robert Bergqvist believes that these “don’t seem to be important for the Swedes”, and only Sweden faring poorer economically than the eurozone would convince the public to back joining the currency.
But Bergqvist also feels that the arguments in favour of the EMU are not so clear cut. The Swedish economy has performed fairly well outside of the EMU, and the independence of Swedish monetary policy allows Sweden to “probably react more swiftly than the ECB”. While the euro provides the stability the krona needs, the European Central Bank increasingly has to deal with divergent interests and tensions in interest rates.
Bergqvist would prefer to see how the ECB and EMU manage the current crisis before considering membership of the currency union. The problems currently plaguing the Swedish economy stem from the global economic downturn, and such problems exist “irrespective of EMU membership”.
The public-elite split is not the only one though. There is also a left-right split that strongly fractures the political and public scene. Curiously in Sweden, unlike euro-sceptic Britain, it has tended to be the left that staunchly opposes the idea, while the right is keen on pushing the boat out. Members of the Moderate Party and the Liberal Party have traditionally been those most in favour.
Is it a coincidence that all this scepticism resides in north-west Europe? Norway happily remains outside of the EU, resting on its oil cushion, while Britain, Denmark and Sweden all vent spleen at moves towards further harmonization of the European political project. And without the firm backing of the general public, Daniel Naurin predicts that “Sweden will not move in the direction of the euro before the Danes and the Brits do”.