commission's report on the consequences of swedish membership in the emu came to the conclusion that sweden should wait until its labour market and wage formation showed sufficient flexibility to deal with a serious disturbance. however, it should be noted that the commission was envisaging a “ small ” eurozone with around 6 countries taking part, whereas now we are talking about 12 countries, representing 40 - 50 per cent of sweden's trade. moreover, in practice the swedish business climate has rarely come seriously out of synch with the eurozone. when sweden has done so, it has mainly been the result of mistakes in sweden's own economic policy and not due to any unforeseeable external disturbance that has afflicted the swedish economy. 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 report on the emu investigation ( sou 1996 : 158 ). 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 devaluation ) of the type introduced in finland. another variant of an asymmetrical disturbance is that asset prices – the property market and stock exchange – due to a too strong economic development are forced up for a short while. however, in situations such as this, the required tightening can usually be managed with the help of fiscal policy. naturally, stabilisation policy via the budget has its limitations since it only works with delay and is dependent on many other long

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. an independent monetary policy will of course remain the main argument against emu membership. the question is how valuable this is. in part, i do not consider the risk very large of sweden alone getting caught up in a crisis where these very instruments will be the best for stabilising our economy. in part, we have seen that the exchange rate can be governed for fairly long periods of time by factors on the financial markets that are not primarily related to the real economy. instead of acting as a shock absorber for business climate developments in sweden that are out of synch with other countries, there is a risk that the krona, by weakening more than motivated by fundamental factors, could instead upset sweden's possibilities for stabilising its development. the economic gains of remaining outside the eurozone thus appear uncertain, while recent research indicates that swedish debate has probably undervalued the integration gains from emu. when you hold your first euro banknote next year and take a closer look at it, you will be able to see that sweden is actually present, on the european map that adorns one side of every banknote. may i be permitted the cautious interpretation of this as a sign of things to come?