Lars Calmfors was one of the strongest voices behind Sweden abandoning the euro as its currency in the 1990s. Now the economist has changed his mind. “The euro would be best for the Swedish economy.”
When Lars Calmfors led the EMU inquiry in 1996, the main argument against the euro was the risk that Sweden would end up in a different economic phase than the rest of the world and thus need its own monetary policy. That assessment remains in theory, but carries less weight today, according to him.
Krona or euro: What is best for Sweden?
“The strongest purely economic argument for euro membership is that it eliminates exchange rate uncertainty against the euro countries,” says Lars Calmfors now in Placerapodden.
He points out that new research has emerged since the 1990s. According to these studies, trade between euro countries increased by 10–15 percent after the introduction of the euro, with even greater effects on foreign direct investment. In the long term, this can lead to higher incomes and increased welfare.
Huge boost for the Swedish economy
“And although it is difficult to translate exactly, I think that 2–3 higher GDP per capita in the long term is a reasonable estimate,” Lars Calmfors tells Placera.
Calmfors also highlights that many of the major crises since the turn of the millennium have been global – such as the financial crisis, the pandemic and the inflation crisis of 2022–2023 – which has meant that economic cycles have moved more in sync between countries. At the same time, Sweden today has strong public finances and greater fiscal policy room for maneuver than in the 1990s.
Inflation and loss of the Swedish krona
A common argument against the euro is that the krona can act as a shock absorber in crises. But according to Calmfors, the opposite happened during the most recent inflation crisis, when the krona’s fall made it more difficult for the Riksbank to combat inflation.
No conclusion, but euros would be best
Despite the economic arguments, he notes that there is considerable popular resistance. If the issue is to become relevant, a longer period of informed debate is required, and ultimately a new referendum.
obrhoff on
Is the strong EURO currently not right now a problem?
illuminatiisnowhere on
No thanks
ComplexWrangler1346 on
Nope
omysweede on
At least he has the wherewithal to admit he was wrong. It would have been great if he had maybe applied this logic ahead of time instead of after the fact?
The whole anti-euro argument in the 90s was based on emotion and romanticising the krona, not logic.
5 commenti
Lars Calmfors was one of the strongest voices behind Sweden abandoning the euro as its currency in the 1990s. Now the economist has changed his mind. “The euro would be best for the Swedish economy.”
When Lars Calmfors led the EMU inquiry in 1996, the main argument against the euro was the risk that Sweden would end up in a different economic phase than the rest of the world and thus need its own monetary policy. That assessment remains in theory, but carries less weight today, according to him.
Krona or euro: What is best for Sweden?
“The strongest purely economic argument for euro membership is that it eliminates exchange rate uncertainty against the euro countries,” says Lars Calmfors now in Placerapodden.
He points out that new research has emerged since the 1990s. According to these studies, trade between euro countries increased by 10–15 percent after the introduction of the euro, with even greater effects on foreign direct investment. In the long term, this can lead to higher incomes and increased welfare.
Huge boost for the Swedish economy
“And although it is difficult to translate exactly, I think that 2–3 higher GDP per capita in the long term is a reasonable estimate,” Lars Calmfors tells Placera.
Calmfors also highlights that many of the major crises since the turn of the millennium have been global – such as the financial crisis, the pandemic and the inflation crisis of 2022–2023 – which has meant that economic cycles have moved more in sync between countries. At the same time, Sweden today has strong public finances and greater fiscal policy room for maneuver than in the 1990s.
Inflation and loss of the Swedish krona
A common argument against the euro is that the krona can act as a shock absorber in crises. But according to Calmfors, the opposite happened during the most recent inflation crisis, when the krona’s fall made it more difficult for the Riksbank to combat inflation.
No conclusion, but euros would be best
Despite the economic arguments, he notes that there is considerable popular resistance. If the issue is to become relevant, a longer period of informed debate is required, and ultimately a new referendum.
Is the strong EURO currently not right now a problem?
No thanks
Nope
At least he has the wherewithal to admit he was wrong. It would have been great if he had maybe applied this logic ahead of time instead of after the fact?
The whole anti-euro argument in the 90s was based on emotion and romanticising the krona, not logic.