Saying No to the ‘Euro’ – Sergo Capital Looks at impacts of Leaving EU for Sweden

December 11 01:46 2018

Sergo Capital look at Swexit
In the middle of the rather chaotic Brexit procedure and with the growing recognition of possibly huge economic costs of leaving the EU, it might appear to be an inappropriate time to ask who might be the next to leave the EU.

Sweden has voted to reject the euro during a referendum. The movement was heated, with opinion surveys in the weeks earlier to the vote showing those opposite to Economic and Monetary Union (EMU) were ahead of those in favour. It has not yet met all the meeting standards, and is not in the running for the third phase of EMU. The Swedish Government has not debated an ‘opt-out’ from EMU, letting it stay outside of the euro-zone in case it meets all the standards.  The vote was consequently a poll on whether to adopt the euro after the requirements have been met.

According to our analysis, the final results of the referendum showed that 56.1% voted against the euro while 41.8% were in favour with a turnout of 81.2%. The results of this referendum showed that the euro has failed in its initial test since the new notes and coins were introduced at the beginning of last year. Euro might bring advantages to economies like Sweden, offering them much-needed stability. The Swedish government should keep the euro project alive to fight unemployment and lesser growth. Theoretically, Sweden was supposed to accept the Euro since it is compulsory for all countries which joined the EU after the signing of the Maastricht Treaty (Sweden is amongst them too) to do so. However, Sweden manages to avoid this by purposely failing to meet the budgetary and financial requirements. The monetary Union between the EU and Sweden can add to lower interest rates and thus to an improved level of employment. Based on Sergo Capital’s observations,  will make it easier for people to travel without considering national boundaries and will contribute to trade, improved competition and lower prices in the inner markets.

Sweden has voted not to accept the euro, but in the event of it meeting all the requirements for entrance in the future, the position of its opt-out remains unclear. Leaving EU is by far the most unsafe option discussed in this election as it might further damage Sweden’s economy and create greater uncertainty. Sweden’s exit from the EU would mean 150,000 fewer jobs and higher prices. The adversaries of British entry in the European single currency are rejoicing over the Swedish votes that are in favour of rejecting the euro. The once-unthinkable idea of leaving the EU was conveyed by the Swedish nationalist part with its roots in Neo-Nazi movements. This will drastically change the face of Swedish politics and will bring the fringe issue of the EU membership to the front. The presiding social democrats will also suffer substantial losses and will fail to form a government, while the centre-right coalition bloc might also fall short of a majority. All the uncertainties are out of impulsiveness that might create instability, which is not good for investment, trade, and economic development in Sweden. It is important for the Swedish government to clarify their withdrawal quickly and in a precise manner.

All of the above opinions reinforce our views that the investment market will be more volatile in the coming month and will be more prone to movements driven by sentiments and reporting of the last turn and twists of the Swexit discussions.

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