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Swedish traders warm to euro

Acceptance of euro notes and coins is becoming more and more widespread in Swedish businesses, despite the country’s rejection of the European currency in a referendum in 2003.

Published: 10 July 2008 17:57 CEST

Swedish traders warm to euro

Businesses in Gotland and Norrbotten are particularly open to customers carrying euros, according to a new survey of shops, hotels, restaurants and tourism-related companies by Swedish business group Företagarna. Of 602 companies questioned, 60 percent said they accepted euros. Hotels and restaurants were significantly more likely than shops to accept the European currency.

Areas near land borders were generally more accepting of the euro than other areas. In Haparanda, on the Finnish border, there were almost no stores that said they would turn down payment in euros. Even in Luleå, 130 kilometres from the border, many traders accepted the currency. In Norrbotten county, where Luleå and Haparanda are situated, and in Gotland, around two-thirds of companies polled said they took euros. Companies told Företagarna that they took the euro because it was what customers wanted.

Företagarna’s CEO, Anna-Stina Nordmark Nilsson, said the survey showed that there would be advantages to Sweden joining the euro:

“Despite the fact that Sweden remains outside the eurozone, the euro has in practice made inroads in parts of the country. It would simplify things for companies if the euro was introduced in the whole country,” she said.

Despite the high acceptance rate for the euro, relatively few customers used the European currency for transactions. Just a third of companies that accept euros in Gotland and Norrbotten said they received payment in the currency at least once a month.

The survey did not reveal whether customers were getting a good deal when paying in euros, or whether businesses were making a tidy profit when changing the cash into kronor. More than 75 percent of businesses said the cost of handling two currencies was small or non-existent.

Three ways Sweden's slashed interest rate will boost your finances

Lower mortgage rates

The policy rate is not the same as the interest rate on your mortgage, although they are linked. In a policy rate prognosis from March, the bank predicted that the policy rate could drop to as low as 2.75 percent by the end of 2025, a drop of 1.25 percentage points since the beginning of 2024.

If mortgage rates drop by the same amount, you could expect a drop in the monthly cost of a 3 million kronor mortgage of around 3,000 kronor a month, not including the tax rebate for interest costs.

IN FIGURES: How could lower interest rates affect your Swedish mortgage?

Higher property prices

As mortgage rates get lower, the housing market is likely to improve, as buyers know their monthly costs aren’t going to skyrocket due to ever-rising interest rates.

If you already own a home and you’re planning on buying and selling at the same time in the market, this will affect you less, as the price of your new home will most likely go up at the same rate as the price of your old home, but this is good news for anyone planning on selling.

It’s worse news for first-time buyers, who will have to save a larger deposit as prices go up, but on the other hand they’ll get lower mortgage rates and a more stable policy rate makes it easier to plan ahead for the future without being surprised by ever-increasing rates.

A stronger Swedish economy

The Riksbank’s decision to lower the interest rate is proof that the bank believes inflation is over – for now at least. This means that we can expect to see inflation remain at a more stable level, and we’re unlikely to see anything close to the ten percent inflation we saw at the end of 2022.

Lower inflation means that Swedish monetary policy won’t need to be as cautious or restrictive in the future, as the government and the central bank no longer need to put all their efforts into fighting inflation.

That’s not to say that authorities will start stimulating the economy just yet – they’re likely to proceed with caution to make sure inflation really is down for the long-term – but Thursday’s interest rate announcement indicates that the “economic winter” Finance Minister Elisabeth Svantesson warned of in September last year could be drawing to a close.

Is it all good news?

In the short term, the value of the krona is likely to worsen somewhat, as the central bank has lowered Sweden’s interest rate ahead of other major central banks. The krona weakened slightly after the bank’s announcement on Thursday, dropping 8 öre in value against the dollar and 7 öre against the euro.

This is good news for people with income in other currencies, but bad news for those of us who are paid in kronor.

Having said that, a stronger Swedish economy is good news for the value of the krona in the long term, although it’s difficult to predict when the krona will start to gain in value and by how much.

At the end of last year, Riksbank governor Erik Thedéen described the krona as “undervalued”, and underlined the importance of having strong foundations in the Swedish economy.

“The Swedish economy is, at its foundations, well-managed, and sooner or later this will lead to a stronger exchange rate,” he said. “Sweden has strong finances, a well-educated labour force, responsible salaries and a good underlying level of competition.”

“As anyone who has tried to predict the exchange rate knows, it’s genuinely difficult to say exactly when it will go up and by how much, but it can also happen quickly when the trend is broken and the krona starts to gain in value.”

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