“The krone is a junk currency”, “the krone is a small crap currency”, “the krone is record weak” and “the krone’s annus horribilis”. These are the headlines that Swedes have read in their newspapers in recent weeks. But alarm bells about the weakness of the krone have been ringing in Sweden for a long time.
Crown lost (you switch to another service) nine percent of its value relative to the euro and 15 percent relative to the dollar last year. In ten years, the decline in relation to the euro has been 22 percent and to the dollar as much as 30 percent.
Swedes have paid about 11.30 kroner for the euro this year. It has sparked a debate about whether Sweden should exchange kroner for euros.
Supporters of the single currency have gained an additional boost to their demands from the fact that Croatia joined the single currency at the turn of the year.
– Yes, the pressure is clearly growing there in the direction that there should be a discussion about joining the euro. I assume that opinions will move in the direction of the euro, but slowly, because Sweden is a slow country in such matters, Emeritus Professor of Political Science Göran Djupsund Åbo Akademi says to by phone.
“Sweden is an exception of an exception”
In addition to Sweden, only Poland, Hungary, Bulgaria, Romania and the Czech Republic are outside the euro. With the exception of Sweden, they all want to join the euro as soon as their economies meet the requirements of the euro area.
– Sweden is an exception of an exception, because our country meets the requirements of the euro area very well, writes the chairman of the think tank Frivärld and a former representative of the Diet of the moderate coalition Gunnar Hökmark In Dagens Industri Debatt (you switch to another service).
In his opinion, Sweden violates the common currency model and the EU’s monetary base more than any other country – and that makes Sweden politically handicapped in European cooperation.
Danes still use their kroner, but the exchange rate of the Danish krone is tied to the euro. The Swedish krona floats freely.
“The introduction of the euro is not timely”
It is not timely for Sweden to join the euro cooperation, said the finance minister Elisabeth Svantesson despite the galloping inflation figures, rising costs and weak krona in an interview in early February.
– There are several reasons for the crown’s weakness. It’s a small currency. We are a small country and in an uncertain situation, small currencies often weaken. In the longer term, productivity and growth will strengthen, and it can also strengthen the krona, Svantesson said In Dagens Industri (you switch to another service).
He did not want to assess how successfully the Swedish central bank has managed its monetary policy. He believes Like the State Bank (you switch to another service)that the crown gets stronger over time.
– Preparing for the euro is not on the table, no, Svantesson stated unequivocally.
Emeritus professor Göran Djupsund believes that the government is playing for time. Djupsund estimates that the majority of the main party, the moderate coalition, is in favor of joining the euro, but the government’s support party, the Sweden Democrats, is probably against it.
– It’s not on the table, but yes, these openings for discussion come from many parties and important parties. Yes, there is a place for fun.
“Late, as in the NATO issue”
Gunnar Hökmark of the moderate coalition and a freelance writer by Fredrik Johansson in my opinion, it is the government’s reluctance to discuss or prepare for joining the euro that is the problem. They compare the situation to Sweden’s EU and NATO membership application process.
– Sweden was clearly against it, until we got to the point where we had to be in favor, writes Johansson In Svenska Dagbladet’s debate article (you will switch to another service).
In his opinion, the Swedish government’s NATO decision last spring was obviously unprepared and was simply made in a panic.
Johansson points out that the EU’s political desire to maintain the euro project has never failed in 20 years, and the support for the currency in the EU is huge. All of Sweden’s closest partners belong to the euro, and for example more than 80 percent of Finns consider the euro to be good for their country.
Hökmark is on the same lines. In Sweden’s neighboring region, Finland, Estonia, Latvia, Lithuania and Germany are “full members of the EU”, the Danish krone is tied to the euro. Only Poland is outside the euro.
– When reality catches up with Sweden, when we realize how alone we are, I believe we will adopt the euro to increase stability and security, Hökmark wrote In Aftonbladet (you switch to another service).
The question of joining the euro came to the fore in Sweden at the end of autumn, when the former legendary CEO of Valtionbank Bengt Dennis warned that weak krone exchange rate (you switch to another service) is “very dangerous for Sweden”. Since then, several heavyweight economists have put the question on the table.
Professor emeritus Göran Djupsund believes that the discussion can liven up after NATO has accepted Sweden’s full membership.
– The NATO process is at the top. Until a final decision has been made, the discussion will not take place with any high intensity.
He estimates that the discussion may liven up depending on the development of the krone’s exchange rate next fall. The discussion could be encouraged by the fact that the next parliamentary elections will not be held until autumn 2026.
– Politicians don’t have to fear that advocating for the euro will become obsolete in the next elections.
Calmfors: It would be good for Sweden to exchange kroner for euros
Emeritus Professor of International Economics Lars Calmfors led a parliamentary investigation that in 1999 urged Sweden to leave the economic and monetary union EMU and the common currency. A few weeks ago he wrote in a debate article in Dagens Nyheter (you switch to another service)that it would be good for Sweden to exchange kroner for euros.
Calmfors explains that he opposed the euro in the past because the Swedish economy was not ready to join the euro. However, he says that he voted for the euro in 2003. In his opinion, the economic conditions had improved then: unemployment had decreased and the state economy had improved.
He states that he will end up with the same result in the current economic situation. The weak krona has become a ballast when global supply disruptions caused by the Russian attack have turned inflation into a sharp rise.
However, Calmfors motivated joining the euro above all because it would increase Sweden’s political weight in Europe in an uncertain time.
Gardell: The krone is a crappy little currency
Also a major investor Christer Gardell has changed his mind about the euro. He is the founder-CEO of the investment company Cevian Capital and one of the largest owners of the Stockholm Stock Exchange. Gardell called the Swedish krona a “little shit currency” in the attention-grabber in an interview (you move to another service) at the end of December.
Gardell opposed the single currency in the 2003 referendum, but now says that the krona is too small a currency, and the Swedish currency market therefore has too little liquidity. That makes investing in Sweden risky.
– As long as we have the crown, it doesn’t matter how we manage our finances. Small junk currency is always undervalued. With the crown, we become poorer than we should be, Gardell said in an interview with news agency TT.
According to Gardell, the argument about a weak krona as an export booster is old-fashioned. The idea is that a weaker krona makes Swedish goods and services cheaper for foreigners, and thus would have a competitive advantage in the world market.
– It worked 20–30 years ago. Back then, things were built here and shipped to the world. Now we have factories all over the world. The old image of the crown dumping prices no longer applies. Now that’s a problem, says Gardell.
Bergqvist: The crown’s annus horribilis
Senior economist at Suurpankki SEB Robert Bergqvist describes last year’s crown for annus horribilis (you move to another service) that is, for a terrible year. The kroon’s exchange rate had already been disciplined by the financial crisis, the euro crisis and the pandemic. Last year, the energy crisis and inflation caused by the Russian attack came on top of them.
Sweden’s central bank has tried to curb inflation by raising interest rates, and the key interest rate was raised from zero to 2.5 percent last year. In Bergqvist’s view, interest rate increases are a problem when housing prices are falling at the same time.
– The high indebtedness of households and commercial real estate companies is a problem when interest rates rise. The market wants to understand what is happening in the Swedish real estate market before investing in the krona, Bergqvist said Dagens Industrin (you switch to another service) in the interview.
State Bank: The war in Ukraine has weakened the krona
of the Swedish State Bank (you switch to another service) according to the most important factor explaining the weak exchange rate of the krona is Russia’s attack on Ukraine and the resulting high inflation and uncertainty in the international financial markets.
Another factor is the rapid rate hikes by the US Federal Reserve. Sweden’s central bank points out that it has widened the interest rate differentials with other countries and probably contributed to the strengthening of the dollar.
According to the State Bank, several factors point to a strengthening of the krone in the longer term. Among them are a high gross domestic product and the development of export prices in relation to import prices.
The Swedes clearly said “no” to the common currency in the referendum (you switch to another service) 20 years ago. At that time, almost 56 percent of Swedes rejected the euro, and 42 percent supported it.
Statistics Sweden (you switch to another service) according to an opinion poll published last July, 58 percent of Swedes opposed joining the euro and 23 percent supported it.
The Swedes justify leaving the euro first and foremost with an independent monetary policy. Göteborgs-Posten (you switch to another service) writes in his editorial that it is not at all certain that Sweden would gain more influence in the Union with the euro. Instead, it would be certain that the EU and the European Central Bank would gain more influence over Sweden.
Göteborgs-Posten warns that Sweden could end up paying for another EU country’s financial crisis.