Kristina Persson: Sweden, EMU and the krona Speech by Ms Kristina Persson, Deputy Governor of the Sveriges Riksbank, at a seminar at Svensk Handel, Stockholm, 16 November 2001. *  *  *  Thank you for the invitation to come here. The theme is an important one, even if we do not yet know when a referendum will be held and whether a decision on EMU membership will be taken in Sweden. There is now just over one month left until 1 January 2002, when 307 million inhabitants of 12 European countries will have the same new banknotes and coins. 15 billion banknotes and 50 billion coins will come into circulation. In the course of a couple of months the national banknotes and coins in the eurozone will cease to be legal tender. The distribution and exchange will involve enormous challenges in terms of practical implementation, logistics and security. Yet I should imagine that many people will soon see it as a positive experience to be able to use the same means of payment throughout almost the whole of western Europe. Seeing the banknotes and shopping in euro prices across the continent brings home the existence of the monetary union in a more tangible way for the citizens of Europe. For us Swedes the euro will enforce our sense of being outside the euro. In addition, we have behind us a period during which the krona has weakened without this being apparent entirely motivated by fundamental factors.
that the krona has been affected by a net outflow of capital from Sweden. The development of the krona and the stock market has shown a strong correlation since the beginning of 2000. This is probably connected with foreign investors selling Swedish shares in line with falls on the stock market, which has affected Sweden more than other countries, as a large part of the stock market value is owned by foreign investors. Moreover, Swedish investors have bought a large amount of foreign shares, which is probably connected with the new pension system and the freer investment regulations for the AP pension funds. It has been possible for the AP pension funds to increase their foreign exchange exposure, i.e. the percentage of foreign assets, from 10 to 15 per cent with effect from this year. The funds can increase their exposure by five percentage points a year to a maximum of 40 per cent in 2006. On top of this comes a factor that is difficult to explain on the basis of classical exchange rate theories. The krona is affected to a large extent by general unease on the global financial markets. During times of financial unrest the krona weakens when investors leave the Swedish market for ones considered a safer investment. This was particularly noticeable during the Mexico crisis of 1995 and the Asia crisis of 1997-98. The recent unrest on the financial markets in connection with uncertainty over the global business climate has once again had a negative effect on the krona.