The role of the euro in Sweden After this glance at what is happening on the euro markets, allow me to turn to the role of the euro in Sweden. I intend to begin with the effect on the securities markets and move on to euroisation and competition. What has the euro meant to the Swedish securities markets so far? My view is that it has so far had relatively little effect. We should remember that developments on these markets are primarily influenced by globalisation and technological developments. And as elsewhere, this has led to frantic activity in consolidation and improving efficiency. Within EMU the introduction of the euro has clearly hastened this process, but in Sweden the euro's influence is of a more indirect nature. The euro market exists as an important alternative, and can thus be said to sharpen competition on the Swedish securities markets through its mere presence. It first and foremost fulfils a need that the krona market cannot completely satisfy. The euro market is perceived as deeper and more liquid, and thus provides an opportunity to borrow large volumes. I am thinking here of, for instance, the large Swedish corporations' need of capital to finance the major structural deals made in recent years. In order to borrow really large volumes, companies like Volvo, Vattenfall and Ericsson have largely turned to the euro market to issue bonds.
According to the price information act, goods sold to individual consumers in Sweden must be priced in the currency relevant to the customer. The act does not state which currency prices should be stated in, but as long as most wages are paid in krona, the retail trade is obliged to price goods in krona. The role of the krona as a means of payment and unit of account is thus protected. Although there is great freedom to choose other currencies, the krona thus has a special position in the Swedish economy. There are also strong economic reasons for Swedish companies and households wanting predictability in their real income to use the krona as contract currency; this applies as long as the value of the krona is upheld, i.e. that there is a low inflation rate, as the real value of the income is determined by price developments on the goods and services consumed by the household/company. In the long term, the development in real purchasing power of the income is determined by productivity developments. Then real purchasing power parity also prevails, i.e. the price of an article is the same in the long term, regardless of the country in which it is sold and the currency in which it is priced. This means that a country with goods and services that cost a lot in foreign currency will sooner or later have to depreciate its currency and/or lower its domestic prices.