Kristina Persson: Sweden and the Euro Speech by Ms Kristina Persson, Deputy Governor of the Sveriges Riksbank, at the Swedish Chamber of Commerce for Germany, Frankfurt, 27 November 2002. *  *  *  Ladies and Gentlemen, Let me begin by thanking the Swedish Chamber of Commerce for inviting me to this conference on a subject of immediate importance to Sweden and of course to the Riksbank. This is also a subject in which I have taken a strong interest for many years, as a Member of the Riksdag and also briefly as a Member of the European Parliament. We live in a challenging time for the euro area, facing both the present downturn of the global economy, and the future enlargement to include the new EU members from Central and Eastern Europe. It is also a decisive period for Sweden, as the issue of EMU participation is now coming to the fore. Given that we are approaching a decision on a euro referendum in Sweden the Riksbank will naturally step up its preparations to ensure a smooth and rapid transformation of Sweden and the Riksbank to the Eurosystem. I will here today share with you some views on the development so far of the euro area and on the possible Swedish membership. My presentation will naturally focus on the economic aspects of EMU, but let me nevertheless emphasize that I personally think that the political arguments for European cooperation remain crucial, especially at times when nationalism is on the rise on our continent.
Our recent experience shows that a small currency on the highly volatile financial markets risk being more affected than the bigger currencies by factors out of its control and with no direct relevance to their economic performance. One such example was the reaction on the currency markets in the days following the 11 September events. It is also quite apparent that the present strengthening of the krona was influenced by the Prime Minister raising the issue of a referendum on EMU. Furthermore, recent experience implies that the deviations from the euro average growth should not be very large in the normal case. Even if Swedish growth and productivity have been somewhat higher than those of the euro area since 1999, recent evaluations show that that the business cycles in the euro area and Sweden are fairly synchronised, despite the asymmetric shocks due to the crises in the mobile telecommunications and IT sectors. However, it cannot be ruled out that Sweden can become subject to serious asymmetric shocks, i.e. disturbances affecting Sweden differently from the rest of the euro area. On those occasions it is important that Sweden has an alternative way of stabilising the economy. One possible instrument is of course to use fiscal policy. The Riksbank recently presented its views on the government report "Stabilisation policy in the Monetary Union" where we elaborate on the possibility of using fiscal policy to stabilise inflation in a similar way as monetary policy does today.