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Swedes Express Concerns Over Weakening Crown Two Decades After Euro ‘No’ Vote

Concerns, Crown, Decades, Euro, Express, Swedes, Vote, Weakening

Swedish Crown Loses 17.5% Against Euro in 18 Months

Swedish Crown Loses 17.5% Against Euro in 18 Months

Inflation Impact Could Mean Higher Interest Rates for Longer

STOCKHOLM, Sept 14 (Reuters) – Need a cheap, reliable second-hand car? Think Sweden, where a nosedive in the local crown currency over the past 18 months is proving a blessing for used-car dealers and other exporters.

Weakness a Mystery Given Long Term Robust Economy

But 20 years after Swedes voted in a referendum to stay out of Europe’s single currency, the crown’s 17.5% slide against the euro is not making everyone happy. Many in a nation used to high living standards are being forced to tighten their belts.

Riksbank Sees Stronger Crown Ahead

“Many foreign car dealers think there is a sale on in Sweden,” Joachim Agren, senior key account manager at the Swedish branch of BCA, Europe’s largest vehicle remarketing company according to its website, told Reuters. He said overseas buyers now account for the majority of its sales at auction, doubling their 30% share of recent years.

Purchasing Power Abroad Tumbles with Weaker Currency

Purchasing power abroad has tumbled with the currency. In the second quarter, Swedes were the 12th biggest buyers of property in Spain, according to Registradores de Espania – four places lower than two years earlier and behind the Chinese.

Impact on Companies and Household Spending

Companies like KP Energy, which imports solar panels to sell to trade buyers, cite the damaging effects of higher purchase costs and rising interest rates, which hit household spending.

“It impacts us a huge amount when the crown weakens against the euro and when the demand picture changes,” its CEO Filip Wiqvist said.

Sweden 20 Years After the Euro Referendum

The weaker currency did help lift Sweden’s exports by 6% in the year to July, despite slower global growth.

But currency volatility makes planning tricky even for exporters, said Jan Soderstrom, CEO of Quintus Technologies, which makes advanced presses used in sectors like aerospace and consumer electronics.

Higher Import Prices and Interest Rates

Higher import prices as a result of the crown’s slide could also mean the central bank must keep interest rates higher for longer to fight inflation, piling pain on households and businesses struggling with loan repayment costs.

Another hike to 4.0% on Sept. 21 is widely expected and banking group Nordea says another could come in November before policy tightening ends.

That could deepen and lengthen a downturn the EU already predicts will make Sweden one of the bloc’s worst-performing economies this year.

Swedes Divided on Euro Membership

Swedes feeling the pinch have warmed somewhat to the euro in recent months, though a majority want to stick with the crown.

A Demoskop poll this week showed 42% would vote “No” to joining the euro, while 34% would support it. On Sept. 14, 2003, 55.9% voted to reject membership, and no major party is pushing for a new referendum.

Mystery Behind Weak Crown

But why the crown has lost around 30% of its value against the single currency over the last 10 years is unclear.

Sweden’s economy is strong, state finances are healthy – government debt is among the lowest in the EU – and its well-capitalized banks are among the region’s most profitable.

In June, accounting firm KPMG said the crown was “mysteriously weak”.

Analysts suggest a number of factors.

  • Central bank’s policy rate
  • Shocks of global financial crisis, COVID-19, and war in Ukraine
  • Riksbank’s asset purchases
  • Uncertainty around Sweden’s accession to NATO
  • Real estate market concerns

Believing the crown is around 20% undervalued, the Riksbank has hedged its own foreign currency exposure in anticipation of future strengthening.

“We and many others are convinced the crown will strengthen at some time, but we would like to see it happen soon rather than over the long term,” Floden said.

Editing by Catherine Evans

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