However, there are some structural problems here: an unmotivated weak exchange rate risks strengthening certain parts of the export industry that do not constitute expansive future sectors. Sweden's future hardly lies in competing with low costs and prices, but rather with quality, cutting edge technology and know-how. When the krona eventually appreciates to a level more motivated on the basis of fundamental factors, Sweden will have an industrial structure poorly equipped to meet the requirements of the future. Conclusions The Riksbank assumes that the krona will appreciate. It is possible that we have already seen the beginning of this development very recently. When the upturn does take place, it may prove even stronger than the Riksbank estimated in its latest Inflation Report. This does not prevent the fact that the recent valuation of the krona has brought new perspectives to the question of Swedish membership in the third phase of the EMU, i.e. participation in the eurozone. The volatility of the krona creates difficulties for export and import companies in making decisions regarding trade and investment. However well monetary policy functions, it still cannot supply the efficiency gains at the microeconomy level that ensue from a single currency. The effects on growth through both price competition over the borders and increased trade could be greater than we have previously often assumed. 4  BIS Review 92/2001  An independent monetary policy will of course remain the main argument against EMU membership. The question is how valuable this is.
Also, in this respect Sweden has changed in recent years: the introduction of inflation targeting and expenditure ceilings should reduce the risks of new economic policy mistakes. In addition, there are strong indications that the correlation between Swedish and eurozone growth will increase if we join the EMU, as trade and integration with the euro countries will thereby be strengthened. We can see already how the long-term Swedish market rates have covaried strongly with those in the eurozone in recent years, even during periods with differences in business climate 1  2  Report on the EMU investigation (SOU 1996:158). BIS Review 92/2001  between Sweden and the eurozone. As far as a Swedish membership of the EMU would reduce these differences in business climate, it will lead to a long-term interest rate development that is more adapted to the business climate. If we still believe that Sweden could become radically out of synch with the rest of Europe, there is of course an alternative to using an independent exchange rate and monetary policy as shock absorbers. The more robust budget situation Sweden enjoys today, for example, should provide a slightly greater scope than during the early 1990s for using fiscal policy for the purpose of stabilisation. One can also imagine building up buffer funds to pay for reduced payroll tax in crisis situations (known as internal 2 devaluation) of the type introduced in Finland.