Sweden's economic dilemma: To keep krona or join euro

According to the new analysis by Bloomberg, like the German mark, the French franc and the Finnish markka before it, Sweden’s krona could eventually fade into history — if advocates of adopting the euro succeed.

Although Sweden has been a member of the European Union since 1995, it has so far declined to join the nearly 30-year-old single currency. Now, however, shifting geopolitical realities — including Russia’s war in Ukraine and cooling transatlantic ties under US President Donald Trump — are prompting a reassessment. For some policymakers, closer alignment with Europe’s monetary union is increasingly viewed as protection against global instability.

Public backing for euro adoption has grown in recent years in the Nordic region’s largest economy. Still, the issue remains divisive, and any currency transition would likely take years. A change in Sweden’s position would mark a significant moment for the EU and bolster the euro’s standing — especially at a time when uncertainty surrounding Trump’s policies has dented confidence in the US dollar.

Why Sweden never joined the euro

Sweden is legally obliged to adopt the euro once it meets the required economic conditions. But when the common currency was launched in 1999, Stockholm opted to stay out, citing both political and economic concerns — particularly sovereignty and the desire to preserve the krona as a buffer against shocks.

In a non-binding referendum in 2003, roughly 56% of Swedish voters rejected euro membership. Successive governments have honored that outcome.

Economically, Sweden has favored retaining control over its own monetary policy and maintaining a floating exchange rate. It has deliberately stayed outside the EU’s Exchange Rate Mechanism II (ERM II), which stabilizes currencies against the euro. Participation in ERM II is mandatory before adopting the single currency.

Sweden is one of six EU countries that continue to use national currencies. The others are the Czech Republic, Denmark, Hungary, Poland and Romania. Denmark negotiated a formal opt-out from euro adoption.

A changed geopolitical landscape

Government ministers argue that today’s geopolitical and economic realities differ sharply from those of two decades ago, strengthening the case for deeper EU integration.

Russia’s invasion of Ukraine was a turning point, pushing Sweden to abandon decades of military non-alignment and join the North Atlantic Treaty Organization. China’s expanding global role has also altered the strategic calculus. But above all, strained transatlantic relations during Trump’s presidency have raised concerns about relying on a small, free-floating currency outside a major bloc.

The fear is that in a geopolitical crisis, the krona could face severe market volatility without the backing of a larger currency union.

The economic debate has also evolved. In December, the Swedish Free Enterprise Foundation published a new analysis led by economist Lars Calmfors — who previously chaired the government panel that assessed euro membership before the 2003 referendum. While that earlier panel advised waiting, Calmfors’ updated review concluded that the commercial benefits of euro membership appear greater than once thought, while the advantages of independent monetary policy seem smaller.

Potential benefits of joining

Supporters argue that adopting the euro would simplify trade and enhance economic predictability. Sweden conducts more than 60% of its goods trade with EU partners. Eliminating exchange-rate swings — which can be pronounced — would lower transaction costs and reduce uncertainty for exporters and importers.

Membership would also bind Sweden more tightly to its European neighbors at a time when leaders are calling for a more unified response to geopolitical disruption and the resurgence of great-power competition.

The risks of abandoning the krona

Critics emphasize that giving up the krona would mean surrendering independent monetary policy. Sweden currently sets interest rates based on domestic economic conditions rather than following decisions made by the European Central Bank for the broader euro area.

The floating krona has also functioned as an “airbag” for Sweden’s export-driven economy. In times of crisis, the currency tends to weaken, helping offset downturns by making Swedish goods more competitive abroad.

There are also concerns about fiscal exposure. Euro area government debt exceeds 80% of GDP, according to Eurostat, compared with Sweden’s debt ratio of roughly 33%. Oscar Sjöstedt of the nationalist Sweden Democrats has warned that current borrowing trends in the euro area could ultimately threaten the stability of the common currency itself.

Political and public hurdles

Public opinion remains the primary barrier. While attitudes toward the euro have softened, more Swedes still oppose adoption than support it. Many analysts believe a second referendum would be necessary to legitimize any decision to change currency.

Political divisions further complicate matters. Prime Minister Ulf Kristersson’s center-right Moderate Party — which leads a minority three-party coalition — officially backs euro membership but has been cautious about prioritizing the issue. The party currently polls in third place.

The opposition Social Democrats, who lead in the polls, have yet to adopt a formal stance. The Sweden Democrats, now the second-most popular party, are firmly against switching currencies.

Meaningful progress appears unlikely before September’s general election. Finance Minister Elisabeth Svantesson has said she would commission a formal inquiry into the costs and benefits of euro adoption if the current government retains power.

How difficult would the switch be?

Technically, the transition could be relatively smooth. Sweden already satisfies most EU convergence criteria, including strong public finances and historically low inflation.

However, it would need to join ERM II and keep the krona stable against the euro for at least two years. Calmfors estimates that the full process would take a minimum of four years.

In practical terms, implementation would largely be a digital exercise. Sweden is nearly cashless, minimizing the logistical burden and expense associated with withdrawing banknotes and coins.

For now, the krona remains in circulation. But as Europe’s political and economic landscape shifts, the question of whether Sweden should trade it for the euro is once again moving toward the center of national debate.

By Tamilla Hasanova