“The Riksbank has aggressively, using a high repo rate, tried to prevent household debt from rising” The first part of the criticism can in turn be divided into different parts. For one thing, it claims that the Riksbank has leaned against the wind aggressively, and for another thing that household debt has been the main, if not the only, reason for this policy. I intend to comment on these points one by one. So how much has the Riksbank in practice leaned against the wind in recent years? My view here is clear. The monetary policy conducted after the crisis has for the most part been governed by traditional monetary policy motives, that is, the expected development of economic activity and inflation over the coming years. Giving consideration to the risks associated with the developments in household debt and housing prices has been part of our assessment, but a relatively minor part. The picture painted in the criticism has been quite different. Here the starting point is instead that the Riksbank’s concern over developments in household debt was the main motive for raising the repo rate after the financial crisis. Much of the criticism even seems to assume that household debt was the only motive for raising the repo rate.
With this one should factor in the other elements of EMU: the arrangements in place to promote fiscal discipline and economic policy co-ordination; and the pursuit of price and financial stability by the European Central Bank (ECB). These contribute to a stable macro-economic environment which, together with the climate of greater predictability ensuing from reduced exchange rate risk, support investment and growth. It is with this perspective in mind that fellow central bankers and government officials in the other new Member States have expressed their preference for an early adoption of the euro. It also constitutes the motivation for the Maltese Government’s commitment to implement the necessary reforms that will prepare the economy for the heightened levels of competition ensuing from the Single Market, while providing businesses with a favourable environment in which they should be better able to profit from Malta’s entry in the euro area. New opportunities for business The benefits of the single currency for business could be substantial, and will occur along the various stages from EU entry through the ERM II period to entry in the euro area. They will, however, become more tangible when the euro is introduced as an accounting and physical currency. At that point, the value of the Maltese lira in terms of the euro will be fixed and foreign exchange risk in euro will be eliminated. The need for dual accountancy systems and software will likewise be reduced.